A LibLab coalition supported by the other progressive parties ( and OK there are questions about the SNP there, but let it pass) would have some major weaknesses on other issues. The LibDems would have to accept collective Cabinet responsibility on things to which they are fundamentally opposed like Trident or make more non-negotiable demands than electoral reform which could be seen as the tail wagging the dog. The LibDems would also be seen as appointing the Labour leader and thus the PM - my reading of the Labour Party's leadership election procedures is that while they go through the process, the Deputy Leader, who is also the Deputy Prime Minister, acts as caretaker. Everyone is talking about a Milliband, but there would be a very good case for the Queen summoning Harriet Harman to the Palace.
At least both Labour and the LibDems are committed to electoral reform. My reading is that the requirement that things taken to the Lords be manifesto pledges just about works here, though of course a formal coalition has no manifesto so that requirement is looser anyway - I will take instruction on this.
Since the Conservatives have set their faces like flint against PR and alternative voting, I don't see how they can double back on themselves and give the LibDems anything they would want. And I don't see what the LibDems could guarantee the Tories - the problems with formal coalition with collective cabinet responsibility would be even greater and I can't see Nick Clegg selling the deal to his Parliamentary colleagues let alone the party at large. Indeed, I know various LibDem people on Twitter and here who have said that they would resign from the party over it.
My guess - and I have a long record of being wrong - is that Cameron will try and soldier on for six months in the hope of an upturn in the economy and no worsening of the recession and we will get another first-past-the-post election in November. In the meantime, he will vandalize everything in the name of austerity and try and monster all parliamentary opposition to this as meddling and electioneering.
We need a proper Progressive Alliance for the Autumn election. Prepare for hard bargaining and tough times.