If say the Green Party gets 5% or more of the popular vote in 2008, would that not turn this into a three-party system? This means American citizens have the power, through voting, to break the two-party system, right?
Not really.
Because only the biggest party in each state gets the electorates.
This means that it is meaningless to vote on a small party, since that vote will be in vain.
You have to vote on the "other" candidate, the one that has the realistic chance of beating the other big candidate.
If instead the vote from each state would be proportionally spread over each party and presidential candidate, that would allow for multiple parties and candidates.
To avoid political chaos, just have a 3 or 4 % limit that the parties has to reach to get into the congress.
Or 10 % in an individual state (one party may not be able to get 3% in the whole US but may be able to get 10% in an individual state, then that should be grounds for seats in the congress)