Having spoken to several members of the shadow Cabinet, it appears that the offer is designed to allow the Tory party to seize the moral high ground. They believe that if the Lib Dems were to join with Labour to ram through a change in the voting system—Labour are offering the Lib Dems AV without a referendum and then a referendum on STV—then they would be discredited.
The Tory leadership is stressing that Tory MPs would be free to campaign against AV in any referendum. Indeed, I am assured that Cameron himself would campaign for first past the post.
Personally, I think that if the Lib Dems did do any deal with Labour it would be a disaster for them. They would be propping up Labour, hurting them in every seat where they are competing with the Tories. Next, a Lib-Lab deal would still not command a majority in the Commons even when you add in the SDLP, Slyvia Hermon and the Alliance. I suspect that the markets would not look kindly on a coalition that was so rickety.