The sticking points with Labour were really only twofold, Gordon Brown and the need for more than Lab-LibDem to get a majority. The first part of this has been addressed, Gordon will be gone. The second part is an issue, especially since the SNP and Labour are far from friends. Yet it need not be quite that way. 323 seats are needed, if you consider Sinn Fein never turns up. So Lab-Lib Dem = 315. Plaid Cymru, Greens, the Alliance and SDLP add another 8. So it is done. The SNP is hardly likely to bring down such a government to give the Conservatives an advantage. Messy perhaps? However, the leftwing LibDem rank and file would embrace it.
So now the LibDems get to choose. Conservatives or a coalition of the losers? What will matter is electoral reform, since the LibDems want this to unlock the prospect of being near permanent kingmakers.
However, neither Labour nor the Conservatives are that stupid. Labour knows that it would enable its own vote to be cannibalised by the LibDems, Greens and even the BNP. The Conservatives fear the same from the likes of UKIP, but also fear there is likely to be a permanent leftwing majority.
So the electoral reform issue has been the card the two main parties have played, except it has come to a natural conclusion.
First, the Conservatives offered an all-party committee to look at wider political reform with proposals ready for the next election. The LibDems say that as a fudge, but the Conservatives said it would consider a far wider range of issues than just the electoral system (and that it wasn't the top priority).
Secondly, Labour offered legislation to enact electoral reform. Admittedly its own kind (called alternative vote, also known as preferential voting), but it would be in place for the next election. The LibDems were more impressed, but such a change would only benefit the party modestly.
Thirdly, the Conservatives proposed a referendum on the system Labour was offering. A big step for the Conservatives, but still less than Labour's offer.
Yet both main parties are not offering any form of proportional representation or even a referendum on it. Why? Because both know the other wont do it either. The Conservatives wouldn't offer it, because it would cause civil war within the party itself. Labour knows this, so has little incentive to do better than the Conservatives, yet has done so.
For the Liberal Democrats they are stuck. The Conservatives are offering a solid coalition or confidence and supply agreement, which could last and offers a chance at a referendum on voting reform the LibDems have little interest in, but which looks like a big compromise, as it is Labour's policy on offer. Labour is offering a less stable coalition, but guaranteed electoral reform, and a more acceptable policy mix. It has even rolled its own leader to achieve an agreement.
The corner the Liberal Democrats are in is one of their own making. If Labour is supported, the change in the electoral system will put proportional representation off of the agenda for many years, because change will have occurred. The public wont have much appetite for another change until that is bedded down. If the Conservatives are supported, the referendum will do the same. If it is a "no" result, then the implication is no public appetite for change. If it is a "yes" result, the change will still put proportional representation off of the agenda.
The only way the Liberal Democrats can back themselves out of this is to seek a little less than the Conservatives are offering - a referendum to back, in principle, a change in the electoral system (with a second one on the options after an election), or to focus electoral reform on the relatively toothless House of Lords. Labour wants a fully elected House of Lords, pushing for a form of proportional representation there, might be acceptable to both major parties, given the Lords only has limited powers to amend or reject legislation.
So whatever happens in the next few days, it will be clear that PR is not going to happen. There will be many upset at this, but then again the majority of votes cast at the general election were not for parties pushing PR.
As for me, I'm agnostic about how heads are counted, when what's in them is what matters. I was never enthused about proportional representation in NZ, but then I'm not enthused that my vote didn't count under FPP unless I wanted to pick between four choices I found distasteful. So whatever happens, happens. What matters far more to me is resolving the West Lothian question, which surely will come to the fore if a Labour-Lib Dem government is formed, consisting of a great deal of Scottish, Welsh and Northern Irish MPs, with the vast majority of English MPs in the Opposition.