Instead of isolating, I would move now to take them off of the terror list and ensure that they have an appropriate voice in what happens next.
Yes, I'm all for engagement, I was focusing more on isolating if they begin to pursue the jihadi route and start talking caliphate. It would be excellent if we aligned and engaged with LIFG remnants before AQ attempts to reinforce.

We overlook the rough, dirty fighters and become enamored with some smooth expat opportunist who is less offensive to our sensibilities and throw our lot in with such, and elevate them into power as the new dictator that now owes allegiance to the US and our interests.
Yes, I wrote about this reference Egypt and AlBaradei. It felt really Chalabi like, and I hope we don't try that in Libya.

To exclude the LIFG is to ensure that most active segment stays in the AQ camp and continues to wage international terror on their behalf. We need to let Libyans decide what the fate of the LIFG is, and also allow them to decide who they think should lead them.
The U.S. needs to reevaluate all its so called enemies in North Africa and the Middle East. I'm waiting to see how the Muslim Brotherhood turns out in Egypt. They are in the driver's seat for the government's future in Egypt. The U.S. has to engage with them, and the Muslim Brotherhood is too big in Egypt not to have a seat at the table.