At least, that's what John J. Miller claims in today's New York Times. John, who doesn't seem to be a libertarian in either sense, thinks that's bad for libertarians, mainly because we won't get the Bush tax cut permanently (me, I'd prefer a cleaned up tax code to yet another layer of gobbledygook; between all the capital gains rates and normal income rates, we're now up to about a dozen real tax brackets). Glenn Reynolds makes the reasonable point that libertarians are sensibly reacting to Republicans' policies that they disagree with, even if they are "closer" to being Republican.
I don't necessarily disagree with the "Libertarians are closer to Republicans" thesis; a former Libertarian presidential candidate, Ron Paul, is now a Republican House member from Texas, and Republicans' national rhetoric is somewhat more "libertarian" than Democrats'. At a more practical level, it's harder to advance a socially-conservative agenda in Washington than a fiscally-liberal one, so voting Republican is probably less of a risk to freedom than voting for Democrats — particularly since most Dems run for the hills when it comes to actually sticking up for fundamental freedoms or ending the War on Drugs, lest they appear "too liberal." Then again, a fellow libertarian (and political scientist to boot) tends to vote Democratic (but that's only because he thinks South Carolina's Republicans are fascists).
It seems to me that Democrats and Republicans have two realistic choices to deal with their third party problems: they can either try to get stricter ballot-access laws (which could be hard — the most stringent are being thrown out by the courts fairly regularly, even with the bogus "state interest in promoting a two-party system" argument that seems to pop up from time to time; my recollection is that our Founding Fathers would think our system already has two parties too many), or they can promote some sort of ballot reform like approval voting or Condorcet vote counting that would preserve their duopoly in the short-to-medium term but still let voters blow off steam by voting Green or Libertarian.
On the other hand, such reform could conceivably lead to the full-scale disintegration of the Democrats into various client-group parties (probably a rump comprised of union voters plus a few racial-interest parties concentrated in gerrymandered districts, with the rest defecting to the Greens) and the loss of the socially-agnostic wing of the Republicans to the Libertarians.
More likely it would end up in a situation where Republicans and Democrats would have the bulk of the seats but third parties would be coalition power-brokers; the big question is whether there would be permanent parliamentary-style coalitions in Congress or a more ad-hoc arrangement with no "majority" like we know it today, just floating coalitions assembled by the White House to get its preferred legislation passed.