Poor Nick Clegg. One minute everyone is agreeing with him, next thing he's losing seats (people like me briefly feeling like voting for him, and then reverting to type in the polling station). Even worse, he's being invited to form a government with David Cameron but it doesn't look like there is anything in it for him. If he accepts, the LDs will share the political costs of the inevitable cuts and they will not get what they really want, which is PR. If he refuses, the Tories will claim that the Lib Dems don't want to do their bit to sort out the country's problems.
One neat thing about this election result is it shows up how our political system really works: artificial majorities are created by the electoral rules, and then the biggest party does whatever it wants. However, the moment the biggest party isn't big enough, the whole thing falls to pieces. And the interesting point is that if First Past the Post doesn't deliver a parliamentary majority and you have to have a coalition, then there really is no point in not having PR. After all, if you need to have negotiations between parties ('backroom deals' and 'horse trading' if you're a pro-FPTP type) then you may as well have those parties winning a share of parliament in proportion with their votes. At least that way a Tory-Lib Dem coalition would not be a shotgun wedding.
Final consideration. Maybe I'm biased (well, obviously), but I really do think the Lib-Dems are way closer to Labour than to the Conservatives. I don't see how the two can govern together substantively without splitting their parties.
Really final consideration. I think the LDs would be mad to cut the deal Cameron is offering, or even anything close to it. They should agree not to overturn a minority Conservative government and maybe even give their consent to an emergency budget. But they should then sit in the opposition and wait for the next election, which will probably come sooner rather than later. Then they might get PR if Labour do well enough.