Because you typically remove biases (I.E. Republican or Democrat preferences) as you don't care for either... And instead place an emphasis on better mandates to the benefit all.

You see the big issue with those who are hard democrat or hard republican is that they typically don't like to "haggle", "negotiate" or "reason". - It is their way or the highway so to speak... Even when faced with a more logical, cheaper, safer option.
.. And contrary to popular belief, we do not live in a binary world, there are many shades of grey inbetween the black and the white.

It also means you will typically support a policy based on it's merits rather than the team waving the flag... I.E. Universal healthcare can be a cheaper and more effective system... And there are real-world examples of that working across the planet.

I believe "Moderation Bias" is a very real thing first of all, and I think you are describing it pretty well. A lot of people see being a moderate or a centrist as a virtue, so they will either over-estimate how well they fit into that category, or assign some non-inherent value to middle of the road positions. As such, I would disagree that you remove biases when you stand in the middle. You just hold onto a different bias than those who stand on either side of you.

Further, I think we've seen in American politics lately that your second point isn't really as true in practice as it may seem in theory. Progressives and people on the left such as Bernie Sanders may not like to compromise, but they have accepted a lot of compromise within the Build Back Better bills (both the infrastructure bill that has passed both chambers and the social infrastructure bill which has only passed the House). On the other hand, those who seem least willing to compromise are those who stand in the middle. They are pretty clearly stating "Do it my way or you get nothing" (assuming "their way" isn't just doing nothing in the first place).

I also disagree with your final point that being a centrist is about merit based policy making. Much of the time, a centrist is just someone who fears change, even if that change would be beneficial. "Radical Moderates/Centrists" really aren't much of a thing, which is what you seem to be implying. Centrists largely favor either keeping things the way they are rather than making large or sudden changes, regardless of whether evidence indicates that those large changes would be beneficial. Like I said before, the centrist position holds no inherent value, the same as any other position. 

I suppose there's a possibility that an extreme viewpoint is the correct one as opposed to a more moderate one, but I have yet to experience that.

Who said justice was extreme?

Political reality.

I don't think either side views justice as being inherently wrong. I just think they have trouble agreeing on when to seek it. And it's when you get into that territory that you start to see the extremism take hold and influence people in less-than-productive ways an the whole topic deforms and falls apart. 

Which just leads us right back to the concept of the truth lying somewhere in-between.

No one views the concept of justice as being inherently wrong, but there are certainly political positions which maintain systemic injustices. In order to compromise between fixes to such injustices, you must accept some degree of injustice. Far too often, the moderate position is simply the acceptance of smaller injustices and quieter suffering instead of actually finding the best options in a situation.

Again, the problem isn't justice. The problem is agreeing on when to seek it. And that had been perverted and distorted by political leaders on both sides of the isle to fit their means in the moment. And then you have Fox News telling its devotees that the left are evil-doers and out to destroy the country. And on the other side, you have MSNBC telling their devotees that the right are the evil-doers and out to destroy the country. But the truth of the matter this is: they are the evil-doers themselves. The media and the politicians who are masquerading behind one extreme or the other and using it to further their own agendas, which is mostly (surprise!) power and greed. And it's both sides doing it. The right, and the left. Both of them, equally. And that's why I said a moderate position is what's needed. Very rarely do you hear people these days talk about context, and yet context is the key to just about everything. It's the missing ingredient here; the door to people getting along again and justice truly being served; our salvation, if you want to get super dramatic about it. 

But unfortunately, the media on the right and left are losing the battle to the internet for revenue, so they're forced to drum up this ridiculous extremism where you're either a foe, or an enemy. So there's very little hope for our society finding context and subtlety in anything right now.

And that's just a shame.

I came up Ambivalent Right. *shrug*
I'm also a non-American, so I'm sure the quiz is not completely applicable, but for whatever it's worth.

It is interesting that many of the non-Americans are getting ambivalent right here, despite American politics being quite shifted to the right of many other developed countries. It seems to confirm a hypothesis that I have that it's the American parties that are shifted right with respect to other countries and not the actual population. The problem is that the U.S has a FPTP electoral system where the population's diverse views aren't represented well.