You have some good points. I think the author made a mistake using the word conservative. He should have used Republican instead. The Republican Party can only be called conservative by comparison with the Democratic Party. Your strategic retreat is actually a rout with the Republican Party leaving its conservative base to fend for itself. Such tactics will not win you any support with the troops.
I think that, for the reasons you state, both current parties are going to be replaced.
I stand by "tactical retreat". Here's why:
Clinton proved that you could forward a sorta-kinda-ostensibly, conservative agenda provided you sugar-coated it for the left.
So, if we look at some Bush "victories", what do we see?
1. "No Child Left Behind" - it has a catchy, feel-good slogan of four words or less (all Leftist slogans have this quality, they can't remeber anything longer than that) that threw money at education. However, Bush also got tougher standards for testing, more frequest testing, stricter teacher qualifications, and the abilty to withohold federal funding (i.e accountability). All conservative principles. The only non-Conservative part of this program is the spending, but that's the price you pay to get it through. The momeny part merely made it more palatible to the other side and their union minions.
2. Tax Cuts - by making tax cuts both across the board and limiting the amount of time (until 2009)those cuts are in effect, Bush got a Conservative wish-list item through Congress. The democrats knew they couldn't stop tax cuts, but consoled themselves with the fact that the cuts are not permanent. So Bush got another victory and threw the other side a bone in the bargain.
3. National Security - Bush got approval for the War in Afghanistan and Iraq, mostly because of 9/11 but also because he showed the other side to be hypocritical (Kerry's famous I-voted-for-it-before-I-voted-against-it), and gave the other side what they wanted: public hearings. He also got the Patriot Act passed in the face of the "privacy rights" crowd (which defines privacy rights as the right to keep your perversions quiet and uninterrupted by government. See NAMBLA). He framed the debate in a way that they could not respond to, but, the Patriot Act is also not permanent. It too, needs to be re-debated and tweaked from time to time, which gives dimwits something to scream about come election time.
In each of these cases, Bush gave some in order to advance an item on the Conservative agenda: lower taxes, accountability in public education, greater security and a tougher foreign policy. This is called "picking your battles wisely."
Conservatism cannot leap forward in huge bounds because there will always be a sizable minorty opposed to conservative views. The same is true in reverse vis-a-vis liberalism. Therefore, incremental conservatism is the only way to go until society as a whole is ready to adopt a completely conservative point of view. I can guarentee you that this will never happen, so we have to take what we can when we can and often compromise.