Whether or not Schulz came from a minor party is irrelavent. What matters is whether or not he has the support from the European Parliament (which he does). In other words, his appointment was democratic as it was backed by a majority of the MEPs who voted.
Granting a party instant power simply because they got the most seats would be undemocratic in a system whereas no party breaches 50% of the seats available. If a coalition between minor parties secures an overwhelming majority would it really be democratic to ignore it and favour the largest individual party (despite them having less public approval)?
In the UK the system is the same. A party/coalition only gets into power if they have the support of a majority of MPs. They need not have gained the most seats in order to get into power. A Labour-Liberal Democrat coalition could have been possible if one was proposed and supported by a majority of MPs. There is no 'rule' that forces the largest party to have some power.