one party can simply distinguish itself from te other by being more extreme. Where this leads you can currently see with the Republicans

Conversely, the other party can get votes just by not being AS bad as the alternative, never under any pressure to actually be good. Where this leads you can currently see with the Democrats.

As soon as you have more than two, parties need to have their own agenda to distinguish themselves, and this “vote so tue other doesn’t win” thing that is currently going on for almost a decade fades away.

Ideally, yes, but in cases with a severely entrenched duopoly like in the US, it’s gonna take more than just the presence of alternatives. It’s a start, though.