"It would not do to confuse the nurses with the patients"

From http://www.debate.org/debates/School-uniforms-ought-to-be-worn-in-primary-and-secondary-schools./1/:

For many of these, the reason for wearing a uniform is clear: so that they are easily recognizable. In a hospital, for example, it would not do to confuse the nurses with the patients.

What did the author mean by "it would not do"? Can anyone parse this sentence please? Or is it a typo?

This sentence is fine as it stands: "it would not do" means something like "it would not be a good thing to have happen" here.

It means it would be wrong or it would be undesirable

In this usage, "it would not do" is perfectly valid and indicates that the following expression is undesirable, as in "this will not do at all".

It is an idiom, meaning "it would not be appropriate".

OED, s.v. "do", v; 20.a. "To ‘work’, ‘act’, operate, or turn out (in some way); to do what is wanted; to succeed, answer, or serve; to be fitting or appropriate; to suffice. that will do (that'll do): that is sufficient."

I'm sure you're familiar with that use of "do", you just haven't thought about it before. Consider the following: