Define broken. It is possible to generate (within reasonable time) two files which have the same md5 sum, which means you shouldn't use it to sign anything somebody else have given you.

On the other hand collisions between two different files are still not something you would ever expect to see in the wild so if you are trying to find duplicated files, then you don't have to worry.

No, that extra 10% doesn't mean shit against a brute force attack. As others have stated, use PBKDF2 or bcrypt.