Baboonery,
You make a good point about vying for people's second preferences but I don't really see this as different from today as the parties present a position to voters, not to other parties (as happens in other systems including the Australian version of AV). In fact the Conservative Party probably have to work less hard for the 2nd choices of UKIP or BNP voters than they do to win in FPTP. The Conservatives hardly need to change their policies to capture the additional votes on the right. The campaign for 2nd preference votes seems to be what happens in a multi-party democracy where it is almost always a FPTP two-horse race.

That is no reason not to change the system to one that is more democratic.