Delaware has clearly turned against the Republican brand, but we can all benefit from certain Republican principles. Fiscal discipline comes to mind. And Republicans still have the House, so it’s not like they have nothing to say about spending.
If the House Republicans really want open government, or changes in agency management, they have a lot of leverage - all they need is the courage to use it.
Noman’s right: once the cultural conservatives took possession of the Republican Party during the 1990s, forcing out the old-line libertarian free-market Republicans, they got into office and preceded to spend, Spend, SPEND. This has happened less on the state level in Delaware, but overall the last eight years have severely if not hopelessly tarnished that GOP brand. This explains a good deal of the enthusiasm over Ron Paul.
Frankly, instead of a third party what needs to happen is the development of a replacement second party. Let’s take true fiscal conservatives, put them together with advocates of individual freedom, get to work on the state and local scale, and build a real Libertarian Party.
Let the social and cultural conservatives worry about being the third party for a change.