Agree, I have wondered this since the beginning. I suppose it is a subtle way of implying that the Democratic party isn't democratic, so they use the noun form instead of the adjective. Seems silly to me, but what do I know?
 DP | 1:06 PM

The idea in the 1930s was that the Democrats were allied with the big-city political machines which were purportedly undemocratic. Later Sen. McCarthy used it to imply that Democrats were opposed to democracy by reason of a secret alliance with totalitarian Communism. Its usage now is vestigial; it's essentially code to remind the Republican base that we all are supposed to hate the treasonous Democrat Party.

(Similarly, for a long time after the 1930s, Republicans used to "slip" and pronounce FDR's last name "Rosenfeld" as a nod to the America First-wing of the party. That particular epithet seems to have gone by the boards, however.)
 alkali | 1:17 PM

Fairly interesting piece from The New Yorker about this issue

Hertzberg
or if that doesn't work here's the naked URL
http://www.newyorker.com/talk/content/articles/060807ta_talk_hertzberg

Excerpts:
"Aesthetic judgments are subjective, of course, but “Democrat Party” is jarring verging on ugly. It fairly screams “rat.” At a slightly higher level of sophistication, it’s an attempt to deny the enemy the positive connotations of its chosen appellation."

....

"Luntz, who road-tested the adjectival use of “Democrat” with a focus group in 2001, has concluded that the only people who really dislike it are highly partisan adherents of the—how you say?—Democratic Party. “Those two letters actually do matter,” Luntz said the other day. He added that he recently finished writing a book—it’s entitled “Words That Work”—and has been diligently going through the galley proofs taking out the hundreds of “ic”s that his copy editor, one of those partisan Dems, had stuck in."

Whole the read thing.
 riffle | 1:19 PM

Partially, what's already been said.

But also, say that your name was Mike, or Michael, and you hated being called Mikey, and you told anyone who called you Mikey to not call you Mikey, and this one group of assholes kept calling you Mikey.

(Also, it's grating that its soooo banally stupid, but those who use it find it to be the height of wit.)
 Pooh | 7:46 PM

The parallel that alwyas leapt to my mind was using "Jew" as an adjective instead of "Jewish." For example, "That Jew lawyer."

I have heard conservatives say they use it as some sort of criticism of (undemocratic, natch) judicial activism.
 Trevor | 6:07 AM

My two cents.
 Steve M. | 12:44 PM

The answer to your question is that it's a slur because the people who use it that way intend it as a slur.

From the Los Angeles Times:

"It's a long-standing intentional partisan political slight," said Daniel Weiss, chief of staff to Rep. George Miller (D-Martinez). "It's kind of like flashing colors in a gang. It's code. It says, 'I'm one of you, I'm a right-wing conservative.' "

And experts on political locution say it's a deliberate, if ungrammatical, linguistic strategy.

"The word 'democratic' has such positive emotional valence … so they politicize it to use it as a term to describe a group of political rivals," said Roderick P. Hart, a professor of communications and government at the University of Texas in Austin.

Even such an intellectual lightweight as Rush Limbaugh acknowledges that he uses the word "Democrat" as an adjective to deny Democrats the positive connotation of the word "democratic." It's an insult because they are trying to insult us.
 UncommonSense | 2:24 PM