The Liberal-NDP alliance is overdue. When Chretien pissed away the Lib hegemony in Quebec, that party was left with a stronghold in Southern Ontario and nothing else. That was enough to allow them to block Harpo's majority bids, but to progress no further. Iggy was a predictably disastrous choice - a TO intellectual for a party which desperately needed to reach out to other regions of the country and conjure up grassroots support out of nothing to make the Libs viable again.
The NDP needs credibility in the slightly-left-of-centre voter spectrum. The Libs just need to survive outside of TO, MTL and Vanc. As it is now, they just split the anti-Harpo vote and impede each other.
Layton would be a GREAT PM in a minority govt! He's new, refreshing and a short first term of office would keep the NDP back benchers firmly under control and restrain them from doing anything even remotely far-left. And Harpo does sweet FA for Ontario and brings an out of date Prairie small town set of attitudes to social issues like prostitution that is holding the country back.