So people who vote for parties like the Monster Raving Loony Party and the BNP will have their second preferences taken into account....OMG

Not quite that simple, Saundthorpe.  Each count acts as an election in itself, so everyone's vote is counted as many times as there are counts.  We may even find that some BNP supporters - like those of any party - only cast a single vote.

I'd agree with Martin that the Single Transferable Vote system would be better, but I think that if we can get AV onto the statute books, it'll be easier to move towards proper PR in the future.  If the 'No' campaign wins, I can't see another attempt to change the system for another 40 or 50 years.

Boudi's point is also very true.  If a party/campaign is as unable to put up good arguments for their position, and simply resort to abuse and half-truths, their position probably has little or nothing going for it.