While I generally agree that Bush has not done enough to limit spending, I think there are more things in play than you mention.
First and foremost is terrorism/Iraq/Islamo-fascism. I think anyone that believes this is an important issue would have to reluctantly table their concerns in the other areas. To me the differences in approach to this problem were profound and favored Bush overwhelmingly. I was likely not alone in my opinion on this matter. Weighing this against "sending a message" on fiscal conservatism was not difficult. There was no evidence in Kerry's record that he'd be any more fiscally conservative than Bush anyway. Quite the contrary.
Next, the opportunities for Bush to limit spending are squelched from many angles. First, Congress spends the money. Bush could certainly do A LOT more to provide better guidance here. Also however, there are still many "third rail" topics when it comes to spending cuts. Social Security is the most obvious. Any change at all would be spun out of control and quite possibly cost a candidate the election. That is our fault, not the candidate's. There are other areas as well. A better use of the bully pulpit on topics like these is certainly desirable.
Finally, Kerry had a few open doors to election that he never walked through. I take that to mean he doesn't see them as important. Illegal immigration is the most stark. There are many people in this country concerned with it at many levels (economic, security, education, health care, etc.). It got nary a mention from either candidate. Unlike Social Security, a strong committment to fixing this problem would have been viewed very positively.
To me, the direction the Republicans take over the next four years will be determined by events. Will they be forced into being primarily a "security" party? Probably. The Dems get to decide their course of action. If they stand up on security and US interest along with trying to propose some real (non-communistic) approaches to the demographically driven entitlement problems, they will gain. I doubt they'll do that. My guess is that they move further left.