IMO, it's not the party idea itself that is the problem. Plenty of parties exist in other areas, politics included, that somehow manage to keep the level of discourse above sand-throwing temper tantrums.
Personally, I blame the following for where we are:
1) Karl Rove and the disgusting meme-machine that followed
2) The media, both liberal and conservative, but mostly conservative
There is no longer any respect or dignity for journalism in this country. When you have a meme-machine that is able to get its message propagated so easily by the media, its a recipe for a huge shit sandwich (kudos to whoever finishes that line).
Finally, I think that *anything* that gets too big no longer works for its defined purpose. Once protectionism sets in (corporate, political, social, etc.), you have everyone toting the same message since they don't want to create waves. The end result is just regurgitating the same bs ad nauseum.