The main story in my book and in Cohen et al's The Party Decides is that party insiders -- usually a handful of key donors, activists, and officeholders -- often try to forestall or strongly bias primary elections by rallying around one candidate and discouraging other candidates from competing. A great example of this was the group of Republican insiders pushing Josh Penry out of the Colorado governor's race. I'm inferring and probably projecting a bit, but my impression is that they thought that a Penry/McInnis primary would be too damaging to the party, that McInnis was tested and trustworthy on the issues they cared about, that Penry was a good soldier who was young and could still do great things in the years to come, and that they'd rather devote party money to attacking the Democratic nominee than to criticizing fellow Republicans. This group probably didn't devote much effort to trying to push Dan Maes out of the race because they didn't take him seriously -- he had no experience, no money, and no significant backing. So McInnis would have a clear path to the nomination and a solid shot of taking the governor's mansion.
Whoops. Okay, so it turns out the party rallied behind a seriously flawed candidate. He had a scandal that was invisible at the time but ultimately proved damaging. Republican primary voters, uncomfortable with backing a plagiarist (either because the charge bothers them or because they think it will make him more vulnerable in the fall), are now moving over to Maes' camp. Even in a straight fight, Maes would have next to no chance of winning the general election. But of course it won't be a straight fight, because Tom Tancredo, disgusted by the whole thing, decided to save the village by destroying it.
This is about as bad as it gets for a party. It's sort of like if the Democrats had nominated John Edwards for president in 2008 and the baby scandal emerged a month later. At the outset, this was a winnable election for the Republicans. Now, Democratic nominee John Hickenlooper just gets to sit back and watch his opponents destroy themselves. I can't think of a luckier man in politics today.
How does the GOP pull itself out of this? Well, they may just write this election off to bad luck and focus their attention elsewhere. I suppose it's possible that Tancredo will decide his whole mission was a silly one and withdraw. And then maybe, if McInnis somehow wins the primary, he steps down and is replaced by Penry or the loser of the Senate primary. Yeah, that would be portrayed as a corrupt inside deal, but that would still be better for the party than the current situation.
Party insiders usually make pretty good decisions. They often have more information available to them than your average voter does. But clearly, they can blow it once in a while.