In an excellent post, Noumenalself examines the arguments of the pro-Bush Objectivists, and finds their definitions and logic wanting. At root is a concrete-bound definition of theocracy, which one pro-Republican Objectivist argued is a "a totalitarian government enforcing religious rules of conduct and not merely a government with some religion-inspired laws."
I think this and similar definitions lets the theocrats off too easy. By enshrining faith and sacrifice, theocrats weaken the moral foundation our leaders need in order to properly limit government and protect our freedoms, and that is outrage enough not to support any party that includes them in its coalition. After all, why is it that the ostensive pro-war president refuses to wage a ruthless and uncompromising war against jihad? Because Jesus is his favorite philosopher—and the culture backs him up on it.
The theocrats need not create a totalitarian government to attack gays, outlaw abortion, preach creationism in the classroom, remake welfare into a faith-based initiative, or sacrifice our armed force to the liberty-hating people of the world. They can do damage enough with the power they enjoy now.