In reality, it doesn't really matter much if TLS is used. Most MTAs will use TLS by default when it is available (i.e. if it sees the "STARTTLS" verb in the server's response) but (also by default) most won't attempt to validate the SSL certificate provided by the server -- it can be self-signed, expired, have a messed up certificate chain, or have a hostname mismatch and it will still be accepted.
Proper validation can be enabled, of course, but it is typically not by default. Of course, connecting over a "plain text" connection and then "upgrading" to TLS has its own problems, as you pointed out. The most significant is that a man-in-the-middle can simply filter out the "250-STARTTLS" response from the server and the client will not attempt to use encryption.
Unfortunately, in order to be RFC-compliant, an MTA cannot refuse to transfer mail just because encryption (TLS) is not available.
I wholeheartedly agree that the e-mail protocols need updated -- or perhaps even completely overhauled -- but I think it will be a long time before we see that happen. Besides, even if new protocols were introduced tomorrow that fixed all of this, it would be years before there was 100% adoption meaning that we'd still have to support the current protocols until then.
I don't think you can say, fairly, that "this is incredibly stupid and short sighted", though. I've been working professionally in I.T. for nearly 20 years and SMTP was still around way way before that. The problems that we are currently trying to solve simply did not exist then and almost certainly could not have even been imagined that long ago (recall that RFC733 was authored in November 1977 and RFC822 in August 1982).
Overall, SMTP has proven to be a fairly robust protocol but, as with anything, it needs to adapt.