[Speaking from an American perspective]. I tend to think a multi-party system would be better, primarily by giving voice to a wider range of opinions and candidates. However, a two-party system COULD do a better job at that if they actually cared about that sort of thing. But as our system currently exists, it tends to focus the parties into relatively narrow bands and makes it extremely hard for third parties and independents.
Where this really shows up, to me, is in Congressional Committees where much of the actual work in Congress takes place. The ruling party has far too much dominance over the legislative process. If not for the Senate, there would be some unbelievably horrible turds being put into law by the House. They'd have us out in the forest foraging for grubs by now. I have watched quite a few Committee hearings and I am always impressed by the fortitude of the minority members to even show up knowing that what they say won't ever matter.
Ultimately, though, any system can go astray. Citizens have a tremendous responsibility to be informed and participate in the system. If you close your eyes while driving a horse and buggy you can't really complain when you go over a cliff. Americans have their eyes closed, so I tend not to have much sympathy for our plight.