Whither the Lib Dems?

The electoral reform move that David Cameron and his Conservatives promised Nick Clegg and his Liberal Democrats as part of agreeing to coalition government in Britain came down to a referendum vote on whether or not to change Britain's current first-past-the-post election system, similar to America's, to an alternate vote, or instant-runoff vote, system.

And, the "reform" side was a massive fail; Britons voted for status quo by a 68-32 margin.

For the Lib Dems, add in two other facts: They got shellacked in local elections held at the same time, and that, in turn, is in part because the British public supposedly is dumping on them the majority of blame for the government's huge budget cuts. (Rightfully so, on assessing the blame, as Cameron couldn't do what he's doing if it were as a minority government.)

So, seriously, what happens next?

To me, from what I understand of parliamentary systems in general and Britain's in particular, I certainly could see the Lib Dems booting Clegg from leadership at the next party caucus. And then voting to leave coalition.

That said, would the government fall, or would the Queen bless a minority government?