> Empirically, every country with instant runoff still has two-party dominance.
I suspect this a property of single-member electorates. Australia has IRV, but Senators are elected proportionally within each state. The major parties have more members but do not always command a majority, and most Senates require negotiation to proceed. However because the House of Representatives almost always goes to one party or the other, it is possible to form the Executive and govern.
Empirically, every country with instant runoff still has two-party dominance.
A better system is range voting: http://www.rangevoting.org/
For a really great book on different voting systems and their advantages and disadvantages, see Gaming the Vote by William Poundstone.