It actually makes it EASIER for establishment parties to form coalitions. They just need more seats than the remaining opposition. By splitting the opposition into smaller parts that won't cooperate they can rule with even lower numbers.

The more parties there are in a coalition, the more dysfunctional it is. That has been the saving grace of the current German coalition. Even three parties seems to be too much for Germany standards.

Die Linke is dogshit but they did siphon votes off of the other left-wing parties like the SPD and Grüne. Now that the Linke is about to die some votes will be going to them. Several Die Linke politicians already defected to the SPD.

Right, so why is it bad if Wagenknecht gets some votes from Die Linke, SPD and Gruene? She definitely is less dogshit than Die Linke.

WK + AfD could get 50%+ which is meaningless if WK refuses to cooperate. The remaining establishment parties could form a 4 party coalition and still be able to rule,

Is that better or worse than AfD getting 30% on its own and the establishment parties getting 70%? I'd say it's much better. And imagine for a moment that she goes full establishment. Then she'll just lose her votes.

Again, while I am probably as pessimistic as you, I don't see this having bad outcomes.

like the libertarian FDP which is in the current government but gets destroyed because they can't do anything but vote for far-left shit

And it's a leading cause of infighting and instability in the coalition, which is great.