Depending on your view on the role of government this is not necessarily a bad thing. Canada has had a series of minority governments over the past few years, and that has not been a factor in the recent economic crises.
I don't mind that more than 35% of the British people are represented in government.
Its probably better for parties with at least a common minimum program to work together than two parties that have nothing in common trying to stick together and run a government for 5 years.
Having the Lib-Dems be the king-makers at every election might be a weird case---assuming that no other popular parties begin emerging.
Conservatives in power (right), Liberals in opposition (left/center) hold the bulk of the seats, NDP (left) and Bloc (left/separatists) hold the remainder.
The NDP doesn't have enough seats to help the Cons on their own, and being propped up solely by separatists is seen as distasteful so support for a vote must come from either both smaller parties, or from the Liberals abstaining (the opposition looks bad when voting with the gov't!).
Yet here we are, years later and for the most part it has worked ok. The biggest problem is that parties are always in semi-campaign mode as whenever a money vote is lost by the gov't we'll have an election. This has resulted in some stupidities like targeted tax credits for specific groups (ex: families with kids in sports) that are not good policy, but simply vote buying.