I'll agree with you that more choices can be confusing to people who don't know anything about investing. That's why a good default is important. Steer people into a target date fund based on their age by default, and make sure they know that this fund should do pretty well for them.
For people who aren't total investing newbies, more choices are nice to have. A three-fund portfolio is great for lots of people. Others might want to put a portion of their stash into REITs or emerging markets or place a higher emphasis on small-cap stocks than the total market fund will provide. Having options for more advanced investors is something I certainly appreciate and I wish my own employer's 401(k) had a slightly larger variety available.