I don't think Steele is necessarily a bad choice. The party needs to get off its dead ass and move forward. The GOP has managed to aggravate the very people who should be the core of its support. Thats why it is losing elections. Without that base of support, no party has a chance of winning. Democrats have been much better at putting together the internal coalitions that make winning possible.
On top of that, many core Republican vboters will penalize the party (mostly by staying home) when the party strays, or a party leader goes off the reservation (think what they did to Newt). Democrats by and large could care less if their leaders are satan themselves, as long as they win. Its a different mindset.
Republicans also tend to play things a lot straighter than democrats. The massive vote fraud democrats routinely engage in is not something republicans are going to want to do.