Here are some thoughts,
1. The GOP's big domestic policy weakness lies in crafting a specific economic agenda that can plausibly offer higher living standards and at least somewhat greater security (especially in health care.) It does not follow that to make progress on economics, Republicans need to move left or default on the social issues. Alienating social conservatives makes the job of crafting a winning coalition that is geared to economic reform harder rather than easier. It is possible to stick to social conservative principles while running an economy-focused campaign. Which is to say that while Virginia is not America writ small, Mitch Daniels might have something to learn from Bob McDonnell. One of the lessons of the McDonnell campaign: if you have an appealing economic message and a principled but nonabrasive stand on the social issues, it is to the conservative Republican's advantage to have the Democrat run a "divisive" culture war campaign.
2. Except in the very short term (as in 2010) the GOP cannot win consistently without expanding its demographic base. There is also no chance of a winning and decent conservative politics absent those self-identified conservatives who make up the Republican base. There are two temptations to avoid. The first is the assumption that conservatives can win by bringing the Reagan-era coalition back together and assuming that inroads with demographic groups outside that coalition will happen without special effort. The second is to triangulate against conservatives by moving left in order to win over persuadables who consume mostly left-leaning media and hoping that conservatives will stick with you because they have nowhere else to go. Both roads lead to California. The worst thing is that a lousy center-right politics will tend to alternate between these two approaches as each one, in turn, fails to combine electoral success with good policy outcomes. There is no practical alternative to crafting a policy agenda and message that appeals to conservatives and those who do not think of themselves as conservatives, have not bought into the conservative narrative of the recent past, and who do not consume much if any right-leaning media. That is an enormous challenge because it involve simultaneously threading multiple policy, cultural and media needles.