I was touting similar things, from a German perspective, until recently. Not having an actual Government for months, a right wing nutjob party being the presumptively largest opposition party etc, kinda cured me a bit of that. Still think it's a good idea.
I think NZ's system is at least inspired by the German one, right? I agree that giving fringes a voice is good, and can contain them. But it's just one layer of protection, and it definitely can fail...