The Libertarian Party is more interested in becoming "mainstream" than it is about genuine libertarianism. Ron Paul is probably too extreme for them, but he won't run third party again. He knows there's no point.
It's been a while since I've been involved with the Libertarians, so I'll have another look. But what you're saying doesn't square with my experience at all. In general they've always been more radical than Paul and even less likely to compromise for mainstream success.
If they are moving in that direction, I'd consider a good thing. If they can do it without giving up their core convictions, the nation will benefit.