DALLAS (Reuters) - Doug Warner seems like a stereotypical Republican: Southern, white, male, he served in the military, drives an SUV and likes hunting and fishing.

Doug Warner (L) and his partner Truman Smith, who works as a private consultant and is the president of Log Cabin's South Carolina chapter, pose in this undated handout photo in Charleston, South Carolina. REUTERS/Courtesy of Doug Warner/Handout

He is also openly gay.

Warner’s sexual orientation makes for an awkward fit in a party with a powerful evangelical Christian wing that regards homosexuality as a sin and same-sex marriage as a threat to the traditional family.

“I believe that the approach of the social extremists eliminates our party’s ability to grow in the future,” he told Reuters by phone from his home in Charleston, South Carolina.

For years, bashing the “homosexual agenda” worked well for Republicans. In 2004, the party placed anti-gay marriage referendums on 11 state ballots. All passed by large majorities and the tactic boosted turnout among religious conservatives, helping President George W. Bush win re-election.

But times may be changing. The leading Republican candidate for 2008 is former New York mayor Rudy Giuliani who supports gay rights, including “domestic partnerships” and equal rights under the law.

Republicans were embarrassed this summer when one of their most outspoken anti-gay spokesmen, Idaho Sen. Larry Craig, pleaded guilty to lewd behavior in an airport bathroom, having apparently made a homosexual advance to an undercover agent. Craig has since tried and failed to rescind his guilty plea, saying he was panicked into a confession.

All the major Democrats in the race believe workplace discrimination based on sexual orientation should be outlawed and back full equality in civil unions. Much of the organized gay community has long been an integral part of the Democratic base. Meanwhile conservative gays have felt they had no place to go.

Warner’s concern about his party’s direction has led him to become an active member in a growing movement of conservative gays called the Log Cabin Republicans. It claims to have 20,000 members nationwide with over 40 official chapters.

Interviews with several Log Cabin Republicans revealed a familiar refrain: disappointment with a party seen betraying its commitment to fiscal prudence and limited government.

“Somewhere along the way our party was hijacked by the social extremists who say that government needs to regulate things that were once considered private,” said Warner’s partner Truman Smith, who works as a private consultant and is the president of Log Cabin’s South Carolina chapter.

Slideshow ( 2 images )

“If we believe in lower taxes and less government, what are we going to do? Become Democrats?,” he asked.

While the organization is not endorsing a presidential candidate for 2008, Giuliani is clearly their favorite.

GIULIANI ALONE

This is hardly surprising as he is pointedly alone in the Republican field in his support for gay rights. And it suggests the party may be more diverse than its image suggests.

“I think it is refreshing to see a prominent Republican who is supportive of our issues doing so well,” said Noel Freeman, who is head of Log Cabin’s Houston chapter.

Gay Republican activists say the party needs to expand its base if it wants to remain relevant by shedding its anti-abortion and anti-gay rights platforms and aiming for the political center on social issues.

“I’m afraid that the Republican Party is going to make itself so pure that it will be able to meet in a phone booth,” said Freeman.

Some say the party’s loss of both houses of Congress in the mid-term elections last year shows it needs to change course.

“When we make social issues our priority then the Republican party loses independents and swing voters and loses elections,” said Jimmy LaSalvia, Log Cabin’s grassroots outreach director.

Under Bush, the party took a different tack. His top political strategist Karl Rove, who resigned earlier this year, maintained that the way to win elections was to mobilize the country’s 60 million evangelicals and get them to the polls.

There has long been tension between the party’s religious wing and those who favor low taxes, free markets, fiscal responsibility and a government that stays out of their personal lives.

The Log Cabin Republicans, formed in 1977, are just one vocal strand of the party’s more moderate side. It takes its name from Abraham Lincoln’s humble origins and says it aims to bring the party back to its inclusive roots.

Its influence is obviously limited by its small though growing numbers. The South Carolina chapter for example was formed just three years ago but now numbers in the hundreds.