I've had some contact with Libertarian Party presidential candidate Robert Milnes who is campaigning on a platform to unite the Libertarian Party and libertarian-leaning Republicans with the Green Party and progressive Democrats on common issues.
He believes that these groups comprise a plurality of the electorate that would be sufficient to propel him into the White House. Of course, where he goes from there with a partisan Congress is anybody's guess, but the idea of a progressive/libertarian alternative to the current crop of Republocrat presidential candidates is intriguing.
I do not agree with his ideas on some of the issues and they are unrealistic, to put it mildly. However, I do think that if the libertarian Republican vote is combined with progressive Democrats a fusion candidate could win a plurality of the popular vote. The electoral college is another matter especially in light of the 2000 results.
The are several issues where libertarians and progressives might find common cause. The most prominent, and probably the most decisive issue of the campaign, is foreign policy and opposition to military invasion and occupation of other countries. Beyond this is a tendency to support an end to American subsidy of foreign regimes, especially repressive dictatorships like those in Egypt, Jordan, Arabia and Pakistan.
Another important issue is immigration. Both groups tend to take a more lenient stance regarding open borders and rigid enforcement of immigration laws. They also oppose greater government surveillance and personal intrusion in the name of homeland security.
Both libertarians and progressives have a more tolerant attitude towards government regulation of sexual behavior, drug use (especially marijuana), and other "victimless" crimes. They also share common ground on other issues such as censorship, abortion and medical research.
For these reasons I don't think the idea of a progressive/libertarian fusion candidate can be easily dismissed. The big question is who should carry the banner, and where will they get the money to spread their message.