I see the Democrats as being in a no-win situation. The DNC says that the party needs to stand up for what it really believes to energize the liberal base. The problem is that the liberal base is not that big.
Outside of New York, Boston, Chicago and San Francisco, no Democrat can win with a liberal agenda. They have to pretend to be moderates, and in places like Virginia, even lean to the right.
This is not to say that the United States is overwhelmingly right-wing. But I think Americans generally lean to the right as evidenced by the Democratic victories of Jimmy Carter and Bill Clinton. Neither president came out as left-wing ideologues. They presented themselves as moderate alternatives to failed Republican administrations (i.e. Ford and Bush), whether they actually believed in what they stood for or not. Dukakis and Mondale are examples of Democrats who stood for what they really believed in and made no pretenses otherwise.
As far as Gore and Kerry are concerned, I think their defeat demonstrates the weakness of the Democratic agenda rather than any strong popular support for Bush. With everything that these two had going for them ( i.e. a robust economy for Gore, and an unpopular war in Iraq and economic recession for Kerry) they should have mopped the floor with Bush. It shouldn't of even been close.
This goes to show how the Democratic Party is simply out of touch with mainstream America.