Kilgore's campaign stunk up the place. I would NEVER vote for a Rat at this point, but even I found Kaine's lying campaign and disingenuous ads more appealing than Kilgore's.
Also Warner has been a pretty stealthy Rat and not too bad a governor.
IMHO, can't read much into Kilgore losing. At the state level, the Republican party in Virginia is still trying to recover from previous debacles (Gilmore, Early, etc.).
You are right on the money. You can't look to party affiliation in every race. Warner was a better candidate than Earley, but Earley ran an OK campaign and did pretty well.
Kilgore was an unappealing individual who was only known to Virginians for an unfortunately whiny voice and support for executions. He then ran relentless attack ads aimed at issues of conscience- the death penalty again, support for the 2nd amendment.
He needed to run on tax-cutting and school standards (Republican winning issues as opposed to social dividing issues). He thought the social issues would break his way. They broke against him.
Most Republicans generally favor Kilgore's positions, but not all do. Republicans often vote their conscience and Kilgore lost the votes of Republican death penalty opponents and gun control advocates. Kaine stayed away from the issues and let Kilgore's own ads destroy him.
The state Republican party nominated Kilgore out of groupthink (like Oliver North). They paid the price.
Conservatives should be impatient with this setback, but Virginia is still a conservative state.