I'm not sure if the Tories failing to secure a majority is plausible if the 1979 election took place in the same circumstances as OTL, the Tories had a big lead from the start, and Labour did fairly well to keep their majority down to 43.
However, having the election at a different time could produce a different outcome. The most commonly cited PoD for this kind of scenario is Callaghan calling an election in 1978- a hung parliament was very possible in light of the polling at the time. Alternatively, you could have the VoNC that brought Callaghan down by one vote fail (there are a million different ways to do this) and Labour are able to use the few extra months they would have bought themselves to pull back a few points, and a strong campaign enables them to grind out a hung parliament.
If you have a situation where Liberal backing would be enough to give either of the main parties a majority, then Steel would probably opt for Labour. He got on reasonably well with Callaghan, and in the eighties he always leaned more toward Labour as a potential coalition partner. If there was a 2010 style result where a Conservative-Liberal arrangement was capable of securing a majority but a Labour-Liberal arrangement was not, then Steel would probably reluctantly throw his backing behind Thatcher, in exchange for some concessions on economic policy that water down her more radical proposals. Either way, I cant see Steel contemplating a full blown coalition- his party's existence was far too fragile for that.
I'm not sure I can see either arrangement lasting-even if the Liberals remained supportive, it would probably only be a few seats from falling apart from by elections and defections. The SDP or another new centrist party would probably still come into existence, but in different circumstances. It would be less likely to ally itself with the Liberals, and since in either scenario Callaghan would still be Labour leader, or the survival of more moderate MPs would mean Healey beats Foot to be his successor, there would be less Labour defectors willing to break off-though Jenkins and his followers would still probably go.
If the Liberals back the Tories, then I can see Labour being returned in a year or two under a more moderate leadership with a comfortable majority- although the manifesto would be influenced by the hard left, it would be mostly ignored when in office. I think that this scenario is the best one if you want a Labour 1980s, as there would probably be a stronger chance of re-election than if Callaghan had salvaged a narrow majority from a 1978 Election.