That's the question David Bernstein asks over at the Volokh Conspiracy.
With no less than three (!) likely or declared Republican presidential candidates who are broadly speaking in the libertarian camp–Mitch Daniels, Gary Johnson, and Ron Paul–libertarian political activists should pick their favorite of the three and work for his nomination, rather than waste their time on energy on pursuing ballot access for an inevitably marginal Libertarian Party candidate. Even if none of those three candidates gets the nominations (Daniels seems to have the best chance), libertarians seem to have their best opportunity to influence the Republican Party's direction since at least the Barry Goldwater campaign. Time for the Libertarian Party to fold shop?
I'm certainly no LPer, but my answer to this is a three-part "no." 1) I want more, not fewer, political groupings competing for my vote. 2) The presidency is just one of, what, more than a half-million elected offices in the United States? When we no longer have uncontested elections for Congress (a shockingly routine occurrence in Southern California, for example), let alone state and local offices, then maybe I'll be more open to the idea of contraction. Though probably not. And 3) while I'm seriously thrilled that there is so much libertarian flavoring in the current stew of GOP politics, it's going to take more than some scattered brave talk during the wilderness years to make me forget the explicitly anti-libertarian strategizing and governance of GOP scoundrels from 1997-2008. Unilateral disarmament at this time does not strike me as advisable.
Bernstein's right–this is the best opportunity for libertoid influence on the GOP since the Aqua Buddha knows when. But that's also in part due to the limited-government Tea Party movement, which has maintained much of its potency precisely by keeping at least some arm's length independence from the Republican Party. Ask Howard Dean's anti-war supporters how their assimilation into the Democratic Borg has worked out for them. And yes, this is a subject treated at some length in The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America, which is now available for pre-order on Kindle!
I suspect, though it's really only a guess, that the real gut-check for the LP right now isn't what to do in a Ron Paul/Gary Johnson/Mitch Daniels world, but how to react to/interract with the Tea Party itself. Will be very interested to read any thoughts on that in the comments.