Does the GOP understand the meaning of the two-party system?

I was watching Fox News this morning and someone made a comment about candidates being "too conservative" to win the general election. I have always wondered why the GOP used that line. Despite ALL the evidence, they think the majority of the country leans left. So they want to nominate a RINO in order to "win." Not only that but they'll actively destroy true conservative candidates in order to get their nominee.

Do they not understand the two-party system? The liberals are supposed to nominate their candidate, and the conservatives nominate their candidate. Each of the candidates is an alternative to the other. It doesn't do any good to nominate someone with ideas a little more watered-down than the other. What is the point of voting? This creates voter apathy among the Right and then the liberal candidate wins. Then the GOP uses that win as "proof" that the country leans left. At this point I think the GOP is just furthering the Left's agenda. Our group of potential nominees is so bad, so so so very bad. We desperately need new leadership in the party, or an entirely new party.

The reasons why Palin didn't run

I'm wondering what happened behind the scenes that would cause Palin not to run. To me it was crystal clear that she was running and then poof she suddenly wasn't. She mentioned her family being a reason, and since then has referenced her family's wishes many times. But it seems like they were on board with the idea of her running - at least from the outside. It didn't seem like anyone in her family was upset or worried. I remember when President Bush decided to run for POTUS and his daughters expressed their displeasure publicly. We didn't see any evidence of that from the Palin family.

The other reason might be the establishment GOP. They might have withdrawn support financially or through endorsements. I have pondered this many times. It seems like the GOP really didn't want her to run. I wonder if someone said something to her that would cause her to withdraw. And I honestly believe Rick Perry ran in order to scare her off. He came in and all the "conservative" pundits immediately touted him as the best nominee, having the "conservative" credentials plus the elite background that they love. He received the GOP support very quickly. He's also a man and they wanted a man, not a "crazy woman." I wonder if the establishment GOP realizes they made a huge mistake?