There seems little doubt that the Lab-Lib Dem talks have collapsed, with some suggestions from Downing Street that Nick Clegg was not really committed to them in any case. He needed to consult Labour to keep some of his party associates happy, along with former leaders like Ashdown and Campbell. Rumours in the early evening include the Lib Dems having 6 cabinet places. Nick robinson is speculating that Ken Clarke could be Chancellor, with Cable as his Chief Sec., and Clegg as Deputy PM of course. Osborne would go to Business in a swap with Clarke. Could be a very sound coalition!
UPDATE: The Spectator's Alex Massie has this explanation of Nick Clegg's recent manouevrings.