I don't think the LibDems are seriously expecting to be in government but the 48% who voted to remain is bigger than the winning party's vote share in any election of recent history, so well worth targeting. Especially so as it is fully in line with LibDem policy, and no other party seems to be willing to stand up for this group at the moment.
Look at what happened with the SNP in Scotland. Something like 45% voted for an independent Scotland but David Cameron had promised more devolution for Scotland if they remain in the UK but was unclear on the details of devolution. The SNP went in to the last election promising Scots they are the party that would ensure that devolution would happen and it worked, helped by Labour and the Lib Dems losing support in Scotland.
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I find the whole 'not fielding candidates out of respect' policy concerning. It undermines the principle of democracy. I voted last night in the Batley vote, but what choice did I have? Labour, racists or lunatics? Paradoxically though, it was the biggest selection of candidates I've ever seen, filling a whole page of A4, sadly not many were seriously electable and I've seen zero campaigning.
I was still disappointed that the BNP managed to come second with 500 votes.
It would have been a very bitter victory for the Conservatives, Lib Dems or UKIP to win the seat in the circumstances and 1 seat in a by-election can't affect which party remains in control.
However, if Labour had put a Dianne Abbott type person forward as their candidate it would have seemed undemocratic to not have viable alternatives on the ballot paper.
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I honestly find it hard to place the Lib-Dems on the spectrum. They're definitely left-of-centre, but their policies seem to vary between "Labour-lite", and quite left (e.g. anti-war).
Going in to the 2010 and 2015 elections they tried to sell themselves as the middle ground party who could prevent the Conservatives implementing very right wing policies or Labour implementing very left wing policies. However, in 2001 and 2005 they came across as being positioned more to the left than Labour.
With some policies it's hard to say where they fit in on the spectrum. For instance, when Labour introduced university tuition fees they sold it in as a left wing idea in that without them binmen are funding the future doctors and they also created an exemption for children from low income families. However, other groups and parties which are more left wing than New Labour were have called for tuition fees to be scrapped as it puts off some children who aren't from high income families from going to university.