I don't think that you have any reason to worry. Once everybody is using index funds, there will be plenty of opportunities for actively managed profits, and people will begin to take advantage of it again.
I think you're right, if a large portion of a company's stock is owned by passive funds, there should be some arbitrage opportunities since the funds won't buy or sell based on the company's fundamentals.
Honestly, I'm with you on this. Still stacking up on index but everyone will have to switch at some point.