Rather provocative thread title don't you think?
The current system is known to favour the big two parties, and gives the lesser parties less influence than they deserve, as you point out. So obviously the Lib Dems want to change things so they get more power in future elections. They've
always wanted proportional representation, and this coalition government is their historic opportunity to get something changed. AV is the best compromise they could get and see it as a stepping-stone towards PR.
What the outcome of the referendum will be I've no idea but it's clear there is huge pressure on the Lib Dems to deliver the reform they've promised (it would be rather embarrassing for them to not achieve any change at all on this front), but it's equally clear that the Conservatives for example are dead set against it. Whether the public care enough, we'll see.
As for abstentions, I don't know the technicals of AV but I guess it's possible to vote Monster Raving Loony as first choice and not give a second choice, maybe?