One of the more fascinating transitions in public opinion has to be how Barry Goldwater evolved from being a reactionary, anti-Civil Rights political hack who never met a foreign policy problem he didn't want to sic General LeMay on, to a distinguished, honorable sentry of libertarian values. Richard Nixon gets blamed for the Republican dive to the bottom, the "Southern Strategy," but Tricky Dick never was so audacious as to make Alabama and Mississippi his electoral base, and if it had been up to Goldwater, we still would be recognizing Chaing Kai-shek as the true ruler of China, while fighting to the death to hold on to sovereignty over the Panama Canal.
As for his fabled libertarianism, it sets the bar pretty low to associate that term with the former Arizona Senator, at least during the 1950's and 60's. As one of Tail Gunner Joe McCarthy's closest friends and associates in the Senate, he was more than willing to use the power of government to harass political enemies, as he himself tried to do in the late-50's against Walter Ruether (his ideal labor leader of the period was James Hoffa !!) His opposition to Civil Rights legislation, based on what he claimed was its emphasis on encroaching federal power, didn't lead to any denunciations on his part against George Wallace or Ross Barnett. His "libertarianism" was of the Chamber-of-Commerce variety, more a smokescreen to back an agenda that comforts the wealthy than anything that truly strengthens the rights and liberties of man.
So what happened to change the perception of the late Senator? I suspect that when his prodigy, Ronald Reagan, was elected, there was a need to create a counterpoint on the right between the electable pol and the principled ideologue, and Goldwater fit the bill to perfection. Even though Reagan had won by a landslide in 1980, Goldwater barely won reelection that year, so there may have been jealosy on his part as well. The Christian Right, many of whom had been lured into politics by the '64 campaign, also came out strongly against the Supreme Court nomination of fellow-Arizonian Sandra Day O'Connor in 1981, and Goldwater's angry response in defense of his homey brought to the fore issues, like abortion, that hadn't played much of a role in his previous campaigns. By the time he was out of politics in 1986, he had found a niche as a critic of the same conservative activism that he had once led, and the revisionist interpretation of his frightening politics of the '50's and '60's began to take hold.