The situation is that one SPD member declared that she won't vote for Ypsilanti should she stand for PM election. She is Dagmar Metzger (below on photo from taz), direct mandate holder from Darmstadt, from the SPD's right wing (a bank clerk and commercial lawyer), who doesn't want to do anything with the heirs of East German communists and thinks this vote for Ypsilanti would be cynical and a break of promise.
Hessen SPD leaders attempted to push her to either modify this decision, or resign (she owes her election as much to Ypsilanti's popularity and local campaigning as her own) and allow someone else.
One problem was that the replacement candidate is of similar mind. Another that this push was widely viewed as 'mobbing' (even by supporters of Beck). Another that Metzger went to the right-wing and rainbow press (Bild, the German The Sun, note: Schröder also loved to chase popularity on the pages of that rag) to complain loudly. It seems some in the SPD prefer Koch to even the weakest association with commies... Yet, Hermann Scheer, the SPD energy expert who would become Ypsilanti's top minister, still hopes for red-red-Green.
With the Greens still unwilling to coalition even with a post-Koch Hessen CDU, and the Hessen liberals still unwilling to enter a Traffic Lights, Koch's calculation seems to add up: he hopes for Ypsilanti's failure in coalition talks, which will allow him to govern on until parliament dissolves itself, by which time public opinion might turn completely against the SPD. With more people like Metzger and more failure of control from Ypsilanti, that may well come, too. *Lunatic*, n. One whose delusions are out of fashion.
The new parliament will be installed on the 5th of April, at that time I think the sitting government of Koch will set a date for new elections.