>My point being that if the only way they can verify that they have decrypted a password is through successful use of that password, and a "simply" encrypted string doesn't really aid in guessing, what use is a heavy duty algorithm?

Difficulty of decrypting/decyphering. Randomness of the encrypted data.
In your simple algorithm, although the possible number of combinations is big, it is nothing a fast computer can't handle with some time. And with computer power nowadays, that time is short indeed.

With a strong encryption algorithm the data produced is basically random. With the proper algorithm, two encryptions with the same key would not produce the same cypher ("salting" of keys and all). In your example the same word always produces the same cypher. Those are clues that aid in the decyphering process.

Note: I am not a cryptographer or a mathematician, nor am I an expert on the subject. If you are interested I can point you to material you can read, written by experts. I especially recommend Bruce Schneier's books as they are easy to read for the non-professional in the subject.