As for the "split into smaller bottles", I think that's a brainfart on the part of the agent, at least around here you're limited to a couple 100ml containers.
See? All TSA achieved is horse shit. You can still end up on the other side, with a litre bottle of whatever substance you wanted to have,and they couldn't stop you. This is why this entire agency is absolutely useless and more an inconvenience than anything.
Of course, blowing up a plane is sort of a stupid notion anyway. If I wanted a terrorist attack, I'd just bomb a building directly, Oklahoma City style. That wouldn't even need to be a suicide attack. If I was dead set on a suicide attack on an airline, I'd just pick the longest security checkpoint line and blow myself up there.
There are plenty of tactical reasons for commandeering an airplane, but blowing it up is generally not one of them.
Actually, you're not allowed to bring such a bottle as I understand things. I didn't really bother scrutinizing, but the impression I got from a few years back was that even if you emptied out an over-sized container, you still wouldn't be allowed to pass it through.
Now that I think about it, I think this impression is from the fact that you can't bring a half-empty bottle (with only 100ml of liquid or whatever the amount is).
Also, I think I recall that there's a restriction on the total amount of liquid you're allowed to bring. I think it was "all of your 3.4 oz bottles have to be able to fit flat inside a X sized ziploc bag" or something like that.