They wanted to reduce the number of MPs (which would mean slightly larger constituencies), and that would naturally have meant updating the boundaries.

The only reason this would make it harder for Labour to win, is that Labour are currently (weakly) benefited by the existing boundaries being out of date - typically Labour win urban seats and Tories win rural ones, and there has been a small shift of population from city centres towards suburbs, meaning that Labour seats are on average slightly smaller (and so it takes less Labour votes to elect an MP). New boundaries would still have been drawn up by the independent boundary commissions, so no danger of US-style gerrymandering.

Decent overview at http://ukpollingreport.co.uk/2015guide/electoral-bias/

The Lib Dems originally agreed to play ball (it was AV Referendum alongside reduced number of MPs on new boundaries):

We will bring forward a Referendum Bill on electoral reform, which includes provision for the introduction of the Alternative Vote in the event of a positive result in the referendum, as well as for the creation of fewer and more equal sized constituencies. We will whip both Parliamentary parties in both Houses to support a simple majority referendum on the Alternative Vote, without prejudice to the positions parties will take during such a referendum.

However after the Tories put the boot in during the AV Referendum they decided to take their ball and go home unless they got Lords Reform too. Tories didn't agree with that, so the ball went home and we're still using the old boundaries that were determined in 2007 at best.

In more depth, this article suggests the net effect would be the Tories losing 15 seats, Labour losing 18, the Lib Dems losing 14, and others losing 3; this perhaps suggests a cynical reason for the Lib Dems changing their minds and opposing the change too!