Evening all,

2 of my Labidochromis Caeruleus have been acting rather strange lately, swim to the top at feeding time, but dont eat.
Swimming about rather lethargic and under their mouths is becoming fatter( throat area ).
1 has just come to the front of tank , with mouth wide open and i am sure i can see babies inside
What the hell do i do now!
Tank has only been up and running for a few months.
Other fish are Cyno Afra White Top and Iodotropheus Sprengerae.

Well, if you want to try and raise the babies remove the female. But you have to have a cycled filter that you can readily use as well as a 10 gallon tank or so. If you don't have a filter that's cycled that you could move over then it gets harder.
Don't know if there'd be enough time to throw a sponge filter in your main tank to colonize it for a week and then you'd be able to move it to a smaller tank? Or you could move them over and throw a sponge filter in there and swirl around the filter from your tank to help jumpstart the colonization process.

Or you can just let nature take it's course, which I feel is perfectly acceptable as well. The fish that hide better live longer

Since you just noticed then the fry aren't very old at all, maybe just a few days. Yellow labs can hold up to 3 weeks. I would wait at least another week and a half before removing her to her own tank. At that point the fry should have consumed their yolk sacks and you cant start feeding your choice of fry foods.

I dont have the space or money to get another tank.

I have just noticed in LFS that they sell a 'floating fish hatchery', it is only small, would this be ok to use or is it way too small?

I'd just let her spit in the tank, the hatcheries really stress the female out. You could strip the eggs from her, however, the adults are really good at sucking fry out through the small holes of the hatcheries.

Besides, unless you are planning to breed to sell, or have homes lined up, you don't want a bunch of fry around.