I think that it's important not to discount the very real possibility that Hillary is choosing to stamp her name on things that just aren't very popular with progressives.  Flag burning amendment, government regulation of video games, etc. etc. really aren't the sorts of things that progressives want as central planks of their candidate's platform.

This in many ways is potentially unfair to Clinton.  She has a pretty strong voting record on progressive issues and, while she's been hesitant to leap into the anti-war camp, her changing outlook has relatively accurately mirrored the American people. Many people would, perhaps, see this as her just following polls. It could also be that she's being convinced at about the same pace as the middle of the electorate which isn't such a bad thing per se.

I would suggest that, while elements of your analysis are probably correct, it's potentially more simple.  Activists are people that are passionate about politics and as such, they want to line up behind someone who's going to get them excited and get fired up with them.  It's why we get excited about people like Dean or Obama or Feingold who are actively engaged in trying to get the "base" excited and mobilized.  It isn't so much that we want or demand their respect as a political force, but we it's much easier to get excited about a candidate when they're excited about us too.  While we're going to keep fighting the good fight, it's a lot more fun, and thus we tend to work even harder, for someone who's clearly glad to have us along and have us happy.

I'd also guess that a lot of activists are pretty much starving for someone to step up and lead with a progressive agenda.  This again is probably not entirely fair to Clinton, because as I mentioned in a journal a while back, leading with the superprogressive issues is probably not the best idea if you're trying to get elected.  Clinton's popularity outside of the blogs suggests that she's doing a pretty good job of reaching more casual Democrats with ideas that they like.  If we look at her voting record, it indicates that she's pretty solid on the progressive issues even though she isn't talking about them all the time.  

As we get further to left and more engaged in the system though, and after spending so many years on the wrong end of things nationally, we really want a candidate that's willing and able to grab a microphone and validate our actions and ideas.  For better or for worse, Clinton isn't willing or able to do that.  The blogs, and progressives in general, want some love and approval from somewhere other than their own blogs and it's only natural to be more inclined towards candidates that provide that.

When I suggested that Dems not campaign on more controversial issues, the reaction was pretty harsh.  After years of trying to convince people that we're right on all of these issues (and we are, ssshhh) and getting beaten down by elections and the media and pundits and everywhere, the last thing we want to do, on a gutteral level, is act in any way like we're ashamed of or wavering on any of these issues. We want vindication, and we want it to be loud and swift and filling and assured when we get excited about a candidate.  Having to go on faith that we can slip it in the back door once we get our candidates elected who don't like to talk about it isn't nearly as satisfying.