(Disclaimer: I work for a company that does housing contract negotiations daily, but IANAL.)
Are we basically writing a contract with no teeth in regard to the inspection - no money back clause?
Sorta. The contract is a "point in time" negotiation: it says, at the time it was written, you will not be making any repairs (under the assumption no repairs have been determined) and will not be covering any cash back / closing costs (under the assumption the price is fair).
If the buyer has an inspection done, and it is a justifiable contract termination point, the buyer saying "I want you to fix / cover costs for 'x'", you refusing, then the buyer backing out does not mean you can keep the earnest money. The buyer had the opportunity to back out regardless, they gave you, the seller, an opportunity to prevent that with a contract modification.
The original contract still stands, and your clause likely won't stand up in court. The only enforcement of the clause is that, should the buyer keep through the process, you WILL NOT be making the repairs at that point nor offering cash back.
As mentioned in the other answer, you offered the house "as-is", and agreed on the price. If you're going to agree to allowing a buyer to back out due to an inspection (which, you'll be hard-pressed in this market to find a buyer without that clause) your "as-is" clause can stand, but if the buyer backs out the earnest money is rightfully theirs.
Is my broker correct in stating, this is basically wasted verbiage in a buy-sell since the buyer can still terminate based on the inspection report?
I wouldn't say "wasted", just "unenforceable." You are making the point you don't want to do any repairs (as is your right). But, the buyer sets the "earnest money" terms, not you. You simply agree whether those terms are acceptable or not.
I always pictured the scenario where the buyer asks for money anyway, seller refuses, buyer terminates because seller refuses, buyer loses earnest money because of item 2 above, court would find the buyer in breach of contract. My broker is quite adamant that's ludicrous.
Your broker is correct. I watched this situation unfold earlier this year, and the exact result was the opposite of that. In fact, the seller took it to court and lost more money because the court asserted that it's an unreasonable expectation, and put the buyer's court-costs on the seller.
Basically, the buyer is proposing a contract modification, you are rejecting it. As such, you are not entitled to the buyer's money at that point, because the original clause of the buyer being permitted to back out due to inspection results still stands. It superceeds your "no repairs / no money" clause.
The escrow company in this case would refuse to even consider this and the earnest money would be distributed - I would have to sue to attempt to enforce this. Why then even state item 2 above in any contract?
Item 2 is still a valid concern for you if you'd like it to be, but it's not a valid way to take money from the buyer. You are terminating the contract at that point (as is your right), not the buyer. (In fact, when my company sends contracts out, we have several valid seller terminations that result in no earnest money payouts, and several valid buyer terminations that also result in no earnest payouts, such as sex offenders being located in the neighborhood and such.)
Personally, I see sellers with "as-is" clauses all the time, and about 40% of the time they throw it out at some point in the process. (By that, I mean, they agree to a certain repair, or cash back, or a price alteration.) You don't have to, but keep in mind that if you don't agree and the buyer backs out, you are not entitled to the earnest money, because the buyer backed out justly.
Think of earnest money as a "if I decide to back out of this house purchase for a reason not listed in my contract, you get it." The seller's contract almost never matters.