To the contrary. Even as it weakened the Democrats, it would tend to even further radicalize the party.
Reason being, under this scenario, the Democrats would lose seats in so-called swing districts -- where candidates are, by definition, more moderated. The more radical socialist and racist Democrats are harbored in safe districts -- where they can afford to be radical.
Thus, a serious beating at the polls is likely to further radicalize the Democrat party. Which would tend to pull them into ever more marginal positions, eventually reducing the Democrats to a radical rump. And a merger with Nader's Greens...
Thomas Jefferson said something along the lines of this, "Two men can look at the exact set of facts and draw diametrically opposed conclusions." This appears to be the case here.
The banking and other business interests that run the democrat party do not want a marginalized party on the scale of the greens. They need two parties to play off against each other. Therefore, the leadership of the dem party, under a republican wipeout scenario, would say "You must move to where most voters are or we will not finance you."
The dems, being more heavily financed be far fewer interests than the broader sponsered repubs, would have to play ball. If those who finance the party are unable to secure their interests in that manner, they'd probably run (and heavily finance) their own dark horse candidate to restore some modicum of viability to the wounded donkey.
This is interesting speculation. My long term prediction is that the Libertarians are going to become the second major party in the U.S., and when they start gaining traction, the Democrats will cave into third party status and then disappear like the Whigs and the Federalists.