Yes, from a progressive perspective New Labour has been a disaster: Iraq, Britain at is most unequal since 1945 and the lights going out on personal and civil liberties. Yet I fail to see how the Liberal Democrats are a solution.
Clegg et al are locked into negativity. In much of Britain they are a surrogate anti-Tory party, while in some cities they are a catch-all anti-Labour Party. They can achieve nothing by themselves and any understanding with Cameron or Brown would split the party.
However hard it may be, if progressives want a party in Britain, they will have to build one themselves.