* Ultra-liberal party set to enter parliament
* Party challenges church, backs gay rights, abortion
* Palikot says would be ready to hold coalition talks
By Chris Borowski
WARSAW, Oct 10 (Reuters) - An ultra-liberal party that surged from nowhere to third place in Poland's election plans to shake up the political system with demands for the repeal of restrictions on individual freedoms and an end to the Catholic Church's privileges.
Janusz Palikot, a wealthy former vodka tycoon, has stormed into parliament with 10 percent of the vote in Sunday's election at the head of a motley crew of political novices that includes Poland's first transsexual lawmaker, Anna Grodzka.
A tired but jubilant Palikot, a former member of Prime Minister Donald Tusk's ruling centre-right Civic Platform that has won re-election, said on Monday Poland was ripe for change.
"We're fighting a culture of delegalisation. In Poland, you go to jail for insulting the President, for a word, for insulting religious feelings, insulting an official," the 46-year-old divorcee and father of four told reporters.
"You go to jail for drinking beer and then walking with your bike. You go to jail for smoking a joint. For abortion. This is a nihilist policy which hurts people."
Palikot's Movement, as the party is known, has tapped into a rich vein of disaffection, especially among young people, by supporting gay rights, abortion, public funding for in vitro fertilisation and legalisation of soft drugs.
Palikot said more Poles would have backed his new party but they decided to stick with Tusk's party for fear of inadvertently helping Jaroslaw Kaczynski's nationalist-conservative Law and Justice party back into power.
Kaczynski espouses the traditional Catholic and patriotic values that Palikot's supporters reject.
"That means about a quarter of Poles wants major changes. They want a secular state, a friendly state," said Palikot, who studied philosophy.
Palikot has scandalised conservative Poles with stunts such as waving a dildo and a toy gun at a news conference to publicise a rape case against a policeman, and with his outspoken call for an end to the Catholic Church's privileges.
The church is revered by many Poles for its role in helping to end decades of communist rule and it has carved out a powerful role in democratic Poland.
But Palikot wants to end tax exemptions for priests and public funding for religion classes in state schools.
"The church did not succeed in this election," said Andrzej Rychard Of the Polish Academy Of Science, commenting on Palikot's breakthrough and Kaczynski's failure to oust Tusk.
"I am quite sure that the less the church engages in politics the better for itself ... That said, the new mood for more secular, liberal trends in society is not represented in all social strata and regions of Poland that are more conservative, so the Palikot offer is not for everybody."
Palikot is now trying to project a more serious image and says he is ready to discuss cooperation or even joining a coalition with Tusk's PO.
Tusk's party allies have suggested that they would rather turn to their pre-election partner, the Peasants' Party.
The two parties presided over strong economic growth over the past four years but their critics say they ducked serious reforms that would put public finances on a sounder footing.
Palikot said the slim four-seat majority secured by the two ruling parties in the new lower chamber, or Sejm, would allow smaller, conservative fractions in each party to hijack more ambitious efforts to change.
(Writing by Chris Borowski and Gareth Jones, editing by Timothy Heritage)