I don't think that's a rare situation at all. There's a large population out there that doesn't identify with R/D (in US politics), but does identify more closely with a 3rd party. But they never vote for them because "tactics". That doesn't mean those people wouldn't find R or D acceptable, it just means the're ideologically closer to a 3rd party. What AV is trying to get at is the situation where the most people are accepting of the outcome.
If a candidate is not acceptable, you don't vote for them. The situation you're describing is not one of selecting from Ideal, Good, Bad; it's the situation of selecting from Ideal, Somewhat Bad, Bad. If you're unwilling to vote for a candidate, they are by definition not "Good" to you. So you would just vote for the Ideal candidate in that situation.
In the worse case (everyone just votes for a single candidate), AV simply acts as FPTP. In the average and best case, the candidate that is acceptable to the most voters wins.
Look at it from the view of the US's extreme polarization: if I'm strongly for A, and you're strongly against A, nothing will be done if A wins. But I'm strongly for A, and we're both "meh" on B, then B might not get everything done that either of us wants, but at least the process won't completely break down.