The rise of e-books means libraries are going the same way as video stores. So what are all those shelves going to be filled with once people start downloading stuff? I really think they need to diversify.
Wouldn't it be cool if you could borrow a kayak? How awesome would it be if you could drop in to the library prior to your party and pick up a punch bowl? I have no idea what you use an angle grinder for but I'd love to know that if I needed one I could avoid a trip to Bunnings and get it free from the library.
It wouldn't be hard to get it started. People have loads of stuff that they rarely use that is just taking up space. Surely you could part with that fondue set if you knew you could pick it up at any time should you have a desire to eat things on skewers coated in four types of melted cheese.
Fancy dress parties would be way easier if you could just go to the library and get a Spiderman outfit. You could wear a different outfit every week. It would be ace.