Even if Labour does its job decently as a left-wing party, people will keep thinking their only choice is between FF on one side and a Labour/FG coalition on the other. There's no way Labour could emerge as a major party in this case.
It's worth noting that there's been some attempt to frame such a coalition as a "national government" (which, it consisting of the two largest parties, it sort of is) for extraordinary times, which is probably the best way of going about it.
There's a good post on this over at
politicalreform.ie, by the way.