I personally think they should run Farage against Cameron in Witney, run a full-scale campaign there, and try to get the Labour candidate to withdraw.
Probably still won't win but it'll get media attention (Daily Mail might even endorse it if they're lucky), and more still if they can break 35% or so.
As others have said there's no way Labour would stand down for UKIP.
If UKIP are going to win seats, I think they need to do what the Greens have done in Brighton: focus on an area, get councillors elected, put effort in for two or three general elections in a row, start producing some Lib Dem style dodgy bar charts to squeeze other parties, and if they chose their target well they might have a chance. I'm inclined to think the best chance might be a reasonably safe Tory seat in a socially conservative but not very well off area. Boston & Skegness, where they got nearly 10% in each of the last two elections, came to mind.
A byelection in a Tory seat in a bad area for Labour in the current political atmosphere might be another way.
