If he cannot do better than third in South Carolina, he will not do well anywhere (except his home state of Tennessee). The Florida primary is coming up January 29, and the race there is fairly evenly divided among McCain, Romney, Giuliani and Huckabee. As Hugh Hewitt observes, whoever comes out of Florida the winner will take considerable momentum into Super Tuesday.
Thompson has only 8.5%. He is a true conservative, by most appearances, and should let his voters go to other conservatives who can win. Otherwise he is pulling conservative voters from those candidates and enabling a McCain or a Huckabee to win. The polls there are so close that the 8.5% could make a difference. I am a Romney supporter, and think that the majority of Fred's people would go to Mitt before they would go to McCain or Huck.
Of course, it would be nice of Jeb Bush, who reportedly is Romney-friendly, would endorse Mitt, but I don't see that happening.