I could imagine it might actually benefit wanna-be demagogues like Trump, since no longer do they have to get ~50% of the votes, but a 3 or 4 way split would mean he could gain plurality with a smaller share of the votes.
You can't separate our Two Party System and First Past the Post voting system. One cannot survive without the other.
If we had 5 or 6 parties and a simple "Everyone gets one vote for one person and whoever gets the most votes wins" system still in place yeah we'd be all but guaranteed an extremists of some form every election.
But that won't happen. 3rd parties can't survive in First Past the Post voting systems, the spoiler effect (i.e the entire "Who do we run as our candidate?" debate) prevents it from being anything beyond an occasional fluke.
Look at it this way.
(G)You go into a voting booth and your options are Ted, Bill, John, and Steve. Bill and John are mainstream candidates for the two main parties, Ted and Steve are either independents, 3rd party, or weird outliers in their own major parties.
You really like Ted and fully support him, think Bill is pretty okay but a little whishy-washy on certain topics, don't like John but he's not like the end of the world or anything, and utterly hate Steve and fear him being in power. But you aren't stupid, you watch the news, and you know Bill has broader support then Ted. Who to vote for is a legit moral quandary for you and creates the scenario you describe, it people vote honestly an "extremist" (not in any judgmental sense but in a purely 'outside the broad popular opinion' sense) will be elected very often.
Now if you go into a voting booth and you can rank your choices; Ted, Bill, John, then Steve there is no moral quandary. You can vote your conscious without taking votes away an acceptable alternative.