This is all true, and this why we have bcrypt etc., but it was just an example for illustration. In real-life situations, the input space is much larger still

This is all true, and this why we have bcrypt etc., but it was just an example for illustration. In real-life situations, the input space is much larger still (if you account for longer passwords, case sensitivity, special characters etc.), as long as your passwords are truly unguessable. And at some point, even a very fast hashing algorithm won't be able to keep up. I don't know the exact calculations, but I would expect MD5 to still be hard to break for truly strong passwords (say, 20 random characters). The problem is more that people don't actually choose strong passwords most of the time.