Why are the Liberals still 59 seats behind the Tories (compared to 66 in 2008) even though their vote gap with the Tories has shrunk by over 4%, which is more than a third of the 2008 gap?
Looking at regional data, the Liberals have improved more than 10% relative to the Tories across the West. That big improvement only nets them 2 seats because they were so uncompetitive in the region to begin with. On the other hand, the Grits only shrunk their gap with the Tories by 1% in Ontario, and actually slipped behind the Tories in Atlantic Canada. Furthermore, in Québec, while the Liberals did improve over the Conservatives by 5% (the Liberals lost support, but the Tories lost a lot more), the relevant matchup there is with the Bloc, against whom the Liberals also slid.
So that 10+% out West and 5+% in Québec form the 4% national Liberal improvement relative to the Conservatives (which is actually mostly a Tory drop). But Ignatieff has made no net inroads in the most seat-relevant battles: vs. Tories in Atlantic Canada and Ontario, and vs. the Bloc in Québec. That's why I have the Liberals almost as far back in the seat count as they were in 2008.
Why are the Grits in such dire straits? To start, picture someone that only started paying attention to Canadian politics in October. That person might not yet know that Ignatieff is the Liberal leader, and would definitely not know what the party stands for. The Liberals completely gave up on the "Canadian Identity" card after it failed in 2006, and on the "Policy" card after it failed in 2008. But as a centrist party, it has no "Ideology" card to fall back on, so it's now just drifting in a vacuum. Perhaps it should try fixing the "Policy" strategy (Canadian identity is hard with Ignatieff) rather than dumping it altogether - I'm pretty sure it would have worked rather better if:
1) they had a better salesman than Dion;
2) they didn't spread the proceeds from the proposed carbon tax so thin that people couldn't see the benefit.
Now, I'm not saying they should go with the same carbon tax policy (even though I support that policy). But the point is that laying out a policy failed because they designed it in a hard-to-sell way, and didn't have a good salesman - not because laying out a policy is a bad strategy per se. For all his faults, if he were to stick to an idea (a big if), Ignatieff would probably still be more convincing than Dion...