Yes, the poll results were a disaster for Labour, with the Iraq issue laid firmly at Tony Blair's door. Labour is now in third place - the worst showing for any Labour government ever.
I am hopeful that Tony Blair does stay on as leader, as he is now clearly an electoral liability, and his continued leadership will cause divisions within the party and hopefully lead to its demise. If Gordon Brown were to become leader, it could be seen as a new dawn, and many voters currently disillusioned with Labour might be tempted to vote Labour again to give the party another chance under its new leader.
But the Tories still have some way to go before they can be confident of being within striking distance of a General Election victory. If Thursday's voting pattern were to be repeated in a General Election (expected next year) the result would be a hung parliament, with the Tories winning the most seats.
The problem for the Tories is Labour's current record majority of 164 seats in the House of Commons. A swing to the Tories from a majority of that size is almost unprecedented - certainly in my lifetime. I believe the last swing of that magnitude was when Clement Attlee's Labour government, elected in 1945 with a majority of 146, re-elected in 1950 with a majority of 5, was ousted by Churchill in 1951.
My gut feeling is that it will take two elections for the Tories to gain a workable majority. If they end up presiding over a hung parliament, it's going to be a mess, as they will need the support of the other minority parties to be able to pass any new legislation, making a subsequent election inevitable a short time later. Alternatively, if Labour wins, one hopes that their majority will be too small to sustain them in office. That could bring about another election which I believe they would lose - partly because of the fact that by then, Gordon Brown's 2004 borrowing will have to be paid back and taxes will have had to rise. We might then see a 1945/1950/1951 scenario play out.
The other thing that will go against Labour, and work for the Tories, is that Tony Blair is about to sign up to the EU Constitution - something which most Britons do not want, myself included. But at least he's done a U-turn on a referendum.
British General Election Results: 1945 - present 