It's my personal opinion that Ron Paul is hated by the GOP because he represents what a true small government is all about, not caring about gays, not caring about drugs, not policing the world, etc. When the man says he wants a small government, he litterally means it and will go into the forest of bureaucracy with an axe, swinging wildly, unlike every repbulican president since at least Nixon. Paul would work to cripple much of this war-on-terror that allows spying on citizens, indefinite detentions, etc. Most of all though, and probably the biggest point of distaste, Paul would fight crony capitalism and oppose free-trade deals and schemes to enrich government contractors. Paul is conservative, not neoconservative or a 'capitalist' who would use the state to maintain monopolies at home and via corrupt international trade deals and that's why he is hated.
I do worry that he places to much power to the states. I'm pretty sure we had a civil war over just how much power the states have. States are bound to the bill of rights just as the federal government is and if Right to Privacy binds the Feds, so too does it bind the States.