"My dear departed friend often suspected the Libertarian Party had the potential to be a third party (although that is too late for this thread)."
It still does. If we get a good-sized fraction of the people who say, "I'd vote for the Libertarian candidate, but I don't want to waste my vote" to actually vote Libertarian, even if we didn't win, it'd be such a shake-up that one or more parties would assimilate Libertarian ideology. Nader made a big splash in 2000 and now the Dems have nominated a MUCH more leftist nominee (if Clinton is a 6 on the political-liberal scale, then Kerry is an 8) this time around.
"if the moderates of both parties formed a single party, they'd win damn near every election in the country, national, state, and local. Mainly, because most people are moderate, not liberal or conservative...."
The "moderates" of both parties seem bent on satisfying all people all the time and that's not going to work out in the long run.