How should we interpret the situation of 1968 when all of American politics seemed to be undifferentiated and intertwined?
It is going a bit too far to say that American politics was undifferentiated at this time. However, we can generally say that the situation was like it was because the US was undergoing a major realignment of political parties and views.
In 1968, things were in a state of upheaval. The Democratic Party had become the party of African Americans even though it had long been the party of Southern whites. The Republicans were becoming more conservative on racial issues and Southerners were starting to move in that direction. We had a situation, then, in which the lines between the two parties were not clear because liberals were moving towards the Democrats and conservatives were moving toward the Republicans. These moves were not complete and so politics could be seen as undifferentiated.
The same goes for the Vietnam War. The Republicans were the party of strong anti-communism. However, the war was going badly, leading Nixon to run on the idea of ending the war. This meant that you had liberals generally on the Democratic side even as Democrats tried to defend the war. Meanwhile, the hawkish Republicans were talking about ending the war in an attempt to appeal to voters who were tired of it.
In these ways, the lines between parties were less clearly drawn than they are now.