...seriously a lot of people are getting ripped off buying 16-32GB(which they will never use)...
That part isn't true any more. I constantly have out of memory issues with only 8GB. 16GB is the bare minimum for a gaming rig now, and 32GB would give you nice headroom for the future. Especially since we are moving into 4k, we should see a leap in textures and models, and thus RAM required. ( There's a reason Nvidia just announced a video card with 12GB of RAM on it. ) They're also starting on 8k monitors and TVs, which would necessitate another leap in the textures and models so that their lack of detail does not show with the higher res.
RAM is and never has been a performance parameter. After you have enough, then more will not help one bit...
Also wanted to clarify this a bit. True in the case of Minecraft, but not gaming in general. There is the speed ( as well as latencies ) of the RAM which makes a big difference, as well as simply the amount in most games. Typically you can use more memory than you have RAM thanks to the pagefile. However, it's notoriously slow, so having more RAM will give you a significant performance impact. Naturally as a gamer, I would personally say that if you are getting into the pagefile, then you NEED more RAM, but others are content with it just working.
Again though, it should be noted that in the context of minecraft, everything you said is pretty valid due to the limitations of Java
However, every version this is getting better. Their focus for awhile now has been improved memory handling and garbage collection. Java 8 already saw pretty big leaps here, and I believe they said 9 is supposed to be centered around that as well.