Granted, McCain is far from the ideal GOP candidate, but seems significantly better than the other two.
Destroy the party? The GOP has been very resiliant over 150 years, and has not been "destroyed" despite such non-conservative nominees as Dwight Eisenhower, Richard Nixon, Gerald Ford, George H. W. Bush, and Bob Dole. This is not the first time, even in relatively recent history, that this is happening. And surely an "in" party holding the White House is less likely to be "destroyed" than an "out" party.
McCain "in a stronger position to pass malign legislation than a Democrat"? That depends to a large extent on the makeup of the next Congress, but a 'Rat Congress and a 'Rat president figures to be the most malign circumstance.
It is very unlikely that the Republicans will win both of the next two Presidential races. I would say that the odds of the Republicans winning in 2012 are much greater if McCain loses 2008 than if he wins.
I would suggest that the country would be in worse shape in 2016, after a McCain win in 2008 followed by a Democrat in 2012, than it would be in 2012 following a McCain loss. Unless one regards the decline of this country as inevitable and simply wishes to survive as long as possible, I see no reason to regard the former as preferable.