The 2-Party system & Free-Market Captalism Wont Work

I don't believe that (1) the two party system is working anymore (2) that US style free- market capitalism doesn't work anymore either.
(1) Its obvious with no Repubs voting for the "stimulus bill" & the divisions btwn the Repub & Democ parties are causing probs. in Congress & elsewhere throughout our system. I think its overdue that we need several political parties that are viable. By viable I mean a party with influence, the "Green Party" hasn't done it & almost doesn't count, Ralp Nader basically ruined it 'cause people blamed him for Al Gore loosing the election, so no one gives them credit. The Libertarian Party also has no influence, nor do the rest of the parties simply 'cause they don't get votes. I think that the Democratic party could split into smaller parties - there are plenty of Democrats that don't agree with Obama's policies, there's Democrats to the left, in the middle, to the right - so why can't they split into those groups and each of them have their own political party? The same goes for the Republicans, left, right, middle, centrist, right-wing, etc - they could split into parties too. Then we need a few more - there are plenty of countries/nations that have many parties & things work just fine. I wouldn't know how the two parties would go about it, but I'm sure they'll figure out a way - but what's stopping them? Geez, Rush Limbaugh, Shaun Hannity & Bill O'Reilly & Keith Olberman, etc, could form their own parties! Some may thing the Tea Partiers R somewhat "crazy" & too far to the right; however: it is at least another choice, whether we like that choice or not. Many European (&other) countries have MANY political parties & yet, they're governing works just fine -regardless of a socialist catholic party or a labor party - its still works!
(2) Free-market capitalism doesn't work either: it's obvious with bank failures, greedy venture capitalistic co's like AIG, etc - whose practices has negatively affected the entire world's economy. Just like pure Socialism & Communism didn't work & fell apart, pure free-market capitalism is falling apart & doesn't work. What would be a replacement? I don't really know, perhaps a more regulated form of free-market capitalism, stricter practices that will stop the inherent greediness... & now corporations can contribute enormous amounts of $$ 2 campaigns & candidates - this proves my point! any thought or suggestions welcome.