Does the two party system have any advantages at all?

Over a parlimentary system, does our own system of "winner takes all" style elections have any sorts of advantages?

I was once speaking to someone and they were saying one positive thing about it is that extreme candidates rarely get elected and that both parties find some way to the center.

However, obviously this hasn't really allowed a very diverse number of voices. I mean I consider myself a democrat, but I do think it would be great if the country had other types of voices -- say GP members, libertarians, etc. but the only independant in the House I can think of is Bernie Sanders...

Is it inherant that in our system we would have a two party system? I can't think of any other major democracies which have only two parties. Sure there are many where there two parties dominate the political landscape (I'm thinking Labor vs Tory in Britain, etc) but none quite have the stranglehold on politics as the two parties have in the US.

Is this because of the system itself and the way the EC is set up? Or is it something else?

is that by having a massive party like the Democratic party, that includes people with widely varying opinions on a myriad of issues, you are forced to learn consensus-building. When forging a consensus, people don't give up their different beliefs. They just try to find the most common ground for achieving something good. And it is a skill that comes in handy when governing. In a multi-party system, the consensus sometimes has to be forged among the parties, not within, in order to govern, but we have to do both.

no one gives up their beliefs. Far from it. In fact, in comparison it is OUR system that results in that.

In Europe you will see coalitions form. These parties work together, yet are still separate and hold on to their parties values.

Where as in the US we have a "big tent" and it results in (for example) our party having people like Kucinich in one end and Lieberman in the other. Both hold different views that in Europe would belong in to separate parties. Yet both must remain in a party as a minority, and usually are suppressed by the majority that does not hold their views.

that in a multi-party system, people are more likely to give up their beliefs.

But I specifically disagree that, to use your examples, either Kucinich or Lieberman give up their beliefs or have their views suppressed.

Generally, systems with an effective two-party system, or failing that, a two-block system centered around two major parties, are the most stable. Voters are offered a clear choice between two contrasting alternatives, and with both parties being large, each is essentially a large coalition. When these coalitions are under the same tent, parties must be acceptable to all wings of the party to hold together the entire coalition.

Additionally, as a presidential system, a two-party system is natural. It simply is not effective to have a multiparty presidential system. Generally, to have two parties contesting most elections as competitive, viable candidates is a good thing. Sure, there can be serious third-party candidates in some election cycles without there being any resulting instability (think TR in 1912 or Perot in 92), but by and large a presidential system should have two major parties contesting the national race.

However, to address your other points:
1. NO other country has as static and duopolistic control as our country. PLenty of countries have effective two-party systems: England, Germany, Australia, nowadays, Mexico -- but none have the complete two-party control of the United States. The UK is a two-party system - The Labor Party vs. the Conservative Party but there is a strong third party in the Liberal Democratic Party and a bunch of smaller parties - some regional based, like Welsh Plaid Cymru and the Scottish National Party and the Ulster Unionists - others minor like the Social Democrats.

Also, it's only this century that the two parties have dominated so thoroughly and then too, only after WW2. In the 19th Century, there were plenty of third parties, some of which including the Republicans and the Whigs became national parties or influenced the debate like the Free-Soil Party.

In the early 1900s or late 1800s (not sure which) Congress had representatives from MANY other parties - though Dems and Rs dominated, there were members of parties like the Populists, the Silver Party, the Greenbacks, American Labor, and a bunch of others. Even in the middle part of the century, there was a Wisconsin-based independent party - the Progressive Party, and a Minnesota-based one - the Farmer-Labor Party.

Also, make a distinction between winner-takes-all and presidential systems. Britain and Canada are winner-takes-all systems and they're parliamentary. Winner-takes-all is just a way to elect people, not a form of government. The alternative is proportional representation which most parliamentary countries use and some presidential countries use.

Proportional representation encourages multiparty democracy, which is probably better in a parliamentary system than a presidential system, where there needs to be a clear, viable choice between no more than 3, preferably 2, candidates to allow for a president to claim a mandate. Personally, however, I feel we can still have an effective two-party system and still allow third-parties to function more. Right now, the two major parties effectively shut the third-parties completely out by making ballot access difficult, by making funding impossible, and by limiting exposure in debates and whatnot. Moreover, there are partially-proportional systems that could allow some third-party members to get elected while still preserving an effective two-party system.

The system we have is more stable, wheras the European system is more representitive of peoples personal whims and LESS STABLE. If your coalition falls apart, the government stops working and you have to basically elect a new PM. That's not a great thing to have happen though.