I think a lot of this is political wankage, myself. There are already libertarians in the Democratic party, just as there are in the GOP, because just like any other American political movement there are thousands and thousands of people who don't follow the party line precisely the way it's defined by observers. As a case in point, I would say that a lot of local fans who voted against W last year were "soft" libertarians who were more concerned about privacy issues and social equity issues, as opposed to "hard" libertarians whose main concern was making sure the War on Terror was prosecuted by somebody they could trust to throw down hardcore. Doctrinaire Libertarians (note the shift to a capital "L") of course voted for neither Bush nor Kerry, and saw their candidate doomed to indecent obscurity as usual.
Structurally speaking, I don't think Kos is going to get his wish until the Democrats hit rock bottom and have lost all but the hard-core socialists, at which point there might just be enough libertarians to take over the party if they're sufficiently disenchanted with the GOP. I think this would require a lot of the "hards" to switch parties, and I don't see that happening until the war with Iraq and/or the occupation of Afghanistan are wrapped up. Of course, if we have to crush the Syrians or some other obnoxious throwbacks (my money's on Venezuela) all this will change, but politics is like that. Right now the "hards" seem to be okay with what's happening in the GWoT, if perhaps unhappy that the administration is wobbly on such things as immigration -especially from Mexico- and making DHS run like a proper national security agency instead of a bunch of bureaucratic paper-passers.
I also don't think much of the much-touted conservative crackup that splits the party between the Christian conservatives and the "hard" libertarians. Nobody in either camp is all that happy with W's domestic agenda or the Congress at the moment, since neither side has gotten much of what they wanted due to the President being mainly concerned with the war and not so much with things like the