Democrats certainly wouldn't have the GOP advantage in the New South. Alabama, Mississippi, Louisiana, Arkansas, Kentucky, and West Virginia are bluer than the Caribbean, but Tennessee, Georgia, North Carolina, and Virginia remain stubborn toss-ups that tilt red. The Bush Brothers built solidly Republican machines in Florida and Texas too that have pretty much locked the Democrats out of those states permanently, and South Carolina remains a bastion of conservative Republicanism for reasons that continue to confound.
I doubt the Libertarians would be stronger. They're not a very organized lot. A libertarian(ish) party might fare well, but THE Libertarian Party... eh.
I'm not quite sure you can entirely say 2004 was the pivot though. In 2000 Asians and Muslims were already a pro-GOP demographic and Bush won 40% of the Hispanic vote. If anything, 2004 was more of a tilt - the GOP could have gone in a more libertarian(ish) direction or a more populist direction) and Cheney's campaign tilted them in the socially liberal route.
Daniels's 2004 win was... weird. Cheney picking the OMB Director as his running mate and proceeding to have a stroke mid-campaign was quite the stroke of luck for Daniels (hardy har har... sorry). Choosing NSA Rice, somebody of the same internationalist vein as Cheney, to be the running mate was a smart move too and certainly mixed the coalitions around.
Daniels was pretty inoculated from the catastrophes of his administration though - largely because they were only nominally his catastrophes. When you publicly say that you're appointing the former (accidental) President as Secretary of State and that you will be leaving Foreign Policy to be handled entirely by Vice President Rice and Secretary Cheney so that you can focus on being a Domestic President, it's really hard for anybody to pin you with any blame.
He balanced the budget, handled Katrina like only a master bureaucrat could, saw through key education reforms and the first national school choice program, oversaw privatization of airport security and air traffic control, pushed through immigration reform... and then proceeded to step down in 2007 so he could run for Governor of Indiana. Mitch Daniels, the only guy to become President who never wanted the job.
The housing crisis probably would have been worse if not for Daniels. Fannie and Freddie reforms, cutting off the spigot with the cheap money that was all going into housing-based assets, and him pushing back on the implementation of reporting standards based off the Basel II system (which incentivized holding mortgage-based assets) all resulted in the housing bubble being far smaller than it could have been.
A lot of emphasis is put on the economy for the Democratic wave in 2008, but I think the fact that the GOP ticket was an all-woman Rice-Whitman ticket and that the President was a black woman had a lot more to do with their defeat. Just look at which districts saw the biggest turnout spikes...