More parties can certainly make for more extreme politics. If you look at parliamentary countries with low thresholds, you see politics like Israel's. You have three major parties (Labor, Kadima, and Likud), and a host of minor parties with a few seats. In order to form a government, one of the major parties will often have to ally with an extremist minority party much further to the left or right. In order to secure that coalition, the major party will have to make policy/portfolio concessions to the extremists.
More parties can mean more extremes in parliament, and more coalitions that depends on making concessions to extremists.
It may be more democratic in theory, but in practice it does not push politics toward the center, but instead enables the extremist fringe.