Not much to add. Scottish results should frighten the hell out of us. Shuggy worth reading on this.
In England there are several conflicting things to note. First, clearing out Lib Dems from the North may not add much to our chances of winning a general election, but IMO it does at least claw back some important political ground. This does matter, though winning back councils up north seems to be universally taken for granted. If the LDs had not gone into coalition with the Tories their grip on these places could have got tighter, and this could have caused us big problems in the future (see Scotland for details of assuming historic heartlands always come home). Instead the LDs have knackered themselves as a guilt-free alternative to Labour in areas that won't go Tory.
Second, in the rest of England there wasn't enough progress to make people optimistic in the short term. If you get into the detail there are some cases where we took councils off the Tories, or have pushed councils into NOC and now form the biggest group. The problem in the latter case is that quite a few of these were councils where all seats were up for election. We may tip some more over to us through byelections/defections etc, but for the rest it's four years till we get another crack, at which point the Tories may be much stronger.
That said I am a little bit sceptical about 'we should be doing loads better' arguments. Not in the sense that we don't need to to be doing better in order to be in with a chance of winning, that much is obvious. Rather that we ought to be doing much better given X, Y and Z. I really dislike historical parallels and 'electoral cycles'. So to make an accurate comparison I would compared our position now to the last time we were fighting local and regional elections the year after being booted out after a three-term government in the wake of a global financial crisis. OK?
As for minor parties, it is notable that the BNP is imploding and Respect has all but evaporated. Greens did well, but there maybe some volatility in their council representation from what I've seen in London, and I personally think that a brush with real power will cause them as many problems as it does all minor parties.
Anyway, all this ought to make us focus much more on winning in the South, which has to be A Good Thing. We need to do this a) to win b) because of the SNP, and so to win and c) to start thinking about how we replace the LDs as the opposition in bits of England we aren't usually competitive in, in order to win. This should dispel any notion that Labour is going to tilt significantly to the Left, but I suspect that 'red' Ed figured that out some months ago. Quite exactly where we do go, I am thoroughly unclear about.
One final thought about the LDs, whilst I understand they are in a bind, I think the 'remember we're in power for the first time in decades line' in going to wear thing v quickly now. If I were a left-leaning LD I'd be asking 'so what, if it means we spend 4 years helping the Tories carry out a right-wing programme whilst destroying ourselves in the process?'. Spending four years as David Cameron's prophylactic as the Tories 'engage with' the country before being flushed down the toilet doesn't strike me as much as of a strategy.