>This is just a way to create a slightly more complex password, if it's stored as a fast hash (like md5) then it's still going to be very easy to crack.

It's not about storage, it is about how to get people to use different passwords. Arguably, the passwords are not very different, but what matters is that they are no longer identic

Its still good advice to people who use the same password on all their accounts. 'just prefix the password with the first three letters of the hostname' will make sure they're slightly better protected in case of a password leak.