Existence of other parties doesn't really make it a multi-party system. The US system is by and large set up to be a two-party system and it works as such; a comparison/contrast would be Canada which is also technially set up as a two-party system but has not worked as such for many years, ironically enough.
As far as free market - indeed! Consider who holds the power: the ones with the fat party coffers. Anyone can run a party, except noone but two can actually afford to, and the system will skew results towards them and inherently disfavour anything outside of them. Net result: people off the edge of the two parties (like myself) - however many of them there may be (and often these are substantial minorities) - end up completely unrepresented in government, and disillusiond with the system as such. Democracy at its finest
