This still happens, sure, but it's isolated to the parties themselves, where they are incentivized to appeal to a larger base, which minimizes factional influence from the get-go.
And yes this means that we get idiots like Wilders (and similarly idiotic parties before him, though not as popular). But on the other hand, we have a Pirate Party, an Animal Party (that I'd be more supportive of if they knew to choose their battles better, IMHO), Green Party, Socialist Party, Party for the Elderly, a couple of Christian Parties (different ones, from very strict, to relatively sane but right wing mainstream, and even a leftist one), Labour Party, Liberal (right wing conservative) Party, and many more.
It works, also because if a smaller party gets a seat, what that means is they can voice their standing points, but only really have a good chance of changing something if a larger party also picks it up. However, they are more likely to do that with a smaller party advocating it, because it's a clear signal of popular support for such a point, and it steers the discourse in a particular way.
Another plus is that the extreme crazy (often bigoted) ones, tend to blow up on themselves, because of the evaporation effect (I forget the exact term, it means that moderate people leave, and it becomes an in-fighting echo chamber), because there's always feasible alternatives to vote for, so you don't end up with two parties that are really not representative of whoever would vote for them because it's the "lesser of two evils" (or worse, I've heard some people word it recently as "the equivalent of two evils").