This is the inimitable Alonzo Rachel, explaining why a third party is a bad idea. Though I don’t agree with him 100% on his basic thesis, he makes some sound points.
A third party should be the last resort. Rather, instead of being so quick to jump from the GOP, people need to educate themselves and each other as to what the GOP is supposed to stand for, and they need to start enforcing party discipline–no other party in the world (including the Democrats) is willing to let avowed outsiders represent it and stand for elections under its banner. The GOP needs to start ridding itself of the libs, RINOs, and Paulistas (supporters of both Ron and Rand), because these people do not stand for Republican ideas.
This can be done by getting rid of open primaries, where Democrats and independents can vote; getting rid of caucuses, which can be so easily manipulated; and by forcing congressmen and senators from the party if they have a long track record of siding against it in crucial votes (the Dems forced Lieberman out, but the GOP never had the guts to primary or force out Specter, even though he was much worse). This is not rocket science. Nor is it undemocratic, as there are other parties that people can join if they are not thrilled with what the GOP stands for.
Of course, since the GOP appears unwilling to do these things, there may not be much choice but to have a third party.