This is like saying "cash is so insecure, if you leave your wallet out on the street then anyone could take it", and ignoring that if you put your cash in a hidden safe, it's almost 100% certain that it will never be stolen.

Private keys don't have to be stored on the Internet.  You can create a paper wallet entirely offline and never connect to the Internet until you need to sweep the coins.  So it is actually very comparable to cash.
That's not the purpose of hardware wallets.  The purpose of hardware wallets is to have a separate device to sign transactions which doesn't potentially expose your private keys to the Internet and leave the possibility of a keylogger stealing your coins.

No matter how secured the site is and no matter who designed or developed the security of the site or wallet there is no such thing as 100% secured. Hackers will try to breach any type of wall placed by the person in charge of the site's security. Sad part is you cant even trust the owners of the site themselves because they might be the one who really stole your coins and not the hackers.

If possible, stay away from those online wallets and never use a public computer to make any transaction, specially sending Bitcoins to another BTC address.

The possibilities you have mentioned here, applies to your bank account as well if you have online banking facility. But does that mean, people will not be using it? No, people will use the technically advanced feature because of increased convenience. We don't have any guaranteed security for our crypto currency wallets. We are all prone to cyber attacks. The only thing we can do is to take precautions. Always try to use original operating system and licenced internet security package of reputed companies along with the existing protocols we are using. It better to be prepared than to wait for mishaps to occur.

In general terms, cryptocurrencies are files, it is information. And the main question is, what sort of infrastucture do you use to store your cryptocurrency or make transactions using it.

In the end, there is hardly a solution that can protect you 100%. Always remember about a human factor - people often do not pay heed to even elementary precaution when it comes to protecting their personal data.

Existing types of infrastucture have pluses and minuses. Hardware tokens, used for storing private keys, are quite reliable, but not comfortable to use. On the other hand, many digital cryptocurrencies, although quite convenient, are vulnerable to malware.

I have been long interested in the subject myself, and have been involved in developing the solution that tries to marry high level of security and convenience into one interface. So if you are interested, you can check out my project: https://www.diamondguard.io/

All crypto currency is a high-risk asset. This market is young and it is unclear what will happen in the future. Many governments have not yet legitimized the cryptocurrency.