By the same logic we should reduce the block limit down to 125KB right?

Nope. By this logic we don't fix what isn't broken.

Your right so we should restore the original unbroken 33,554,432 byte limit on messages (to include blocks) from the original client.

Is Bitcoin currently broken?

No, but the 'check engine light' is on, or are you the type that ignores it until it's too late?