But looking at countries that do use proportional representation, we don't really witness such things happening. There are several reasons for this:
1) Your example still assumes that, as in a first-past-the-post system, there are two main parties organized along a left-right axis, and that the vote would be almost evenly split between these two parties. However, looking at what happens in actual countries, we see that there is much more diversity in terms of political parties and ideology. It's first-past-the-post that gives rise to the two-party system, not the fact that, say, paleo-conservatives and free-marketers necessarily have to form one party, and environmentalists and auto workers have to form another one. Countries in Europe that use proportional representation typically have many parties: classical liberal parties, social-democratic parties, green parties, more radical left-wing parties, conservative parties, religious (usually Christian-Democratic) parties, etc.
2) There are thresholds that ensure that crazy people do not get seats. Even a 5% threshold does the trick quite well.
3) There are informal norms that say that, when truly crazy people do get seats, the other parties should not enter into a coalition with them ("cordon sanitaire"). Any party that violates these norms would be punished by voters at the next election.
4) Countries with proportional representation seem to have less partisan politics. Yes, there are still tensions between political parties. But bipartisanship is much more common. At the local level especially, it's not uncommon for social-democratic (nominally socialist) and classical liberal parties to enter into a coalition.