If Bill were to resign gracefully without the protracted navel gazing and infighting then I think that would be accepted well (or at least better) by the public. In addition, Labour isn't governing so I believe the change would not be perceived as poorly as it is not changing the PM, just the Muppet on the other side of the house.
This is what I was thinking. I doubt many people would care too much if the opposition party changed leader, but when you get elected to government with a certain PM and switch halfway through people get irritated.
I think labor are in with a good chance of taking government next time around, but they could probably improve their chances by putting someone more popular at the helm now. Of course, after the Rudd-Gillard-Rudd fiasco they made it a lot harder for the party to get rid of a dud leader, so they have that to live with too...
I'm not saying I want a labor government (not saying I want libs either), but jeez Bill, you have to realise nobody likes you!