Really? The question is this - if the size of the Libertarian Party does increase, from where will it obtain its extra size? Are those newly converted Democrats or Republicans? If Republicans, how will this move the party closer to the middle? If Democrat, how will the anti-left sentiment help it win broader appeal with moderate liberals?
I don't see the Libertarians benefiting from this. All I see is what you painted above - the Republican party imploding onto itself in full plain view of the public. Or, the Republican party finally going Supernova, over a 14 year period of all its hydrogen (read: hot air) being burned up at its core. The Red Giant stage was most likely between the election of W., and the invasion of Iraq. Everything else since has been a total disaster for that party.