Doing 120k on one MB is what % of average damage in a fight? (and yea it can hit that hard I am giving you a best case scenario here). Lets take my totally mediocre total damage done on shannox tonight of 7,786,682. That means if I had a MB that would have hit for 120k and missed then I would miss out on a total of 1.5% of my dps there.... you are right that is huge. Also, that is completely not taking into account that if you are stacking more int/haste/mastery for the hit you are dropping then your spells are all hitting harder all around which also mitigates a miss on MB.
As far as hit always sim'ing out of the ballpark compared to the other stats... no this is not always the case. It depends on the variables you select and what kind of fight style you sim with. I have seen hit/spirit be equal/slightly below mastery.
I am not sure what your point about missing a MF is. Suddenly you are out one GDC if you miss it, but that's not a huge deal either. Also you should be clipping MF for ANY other spell that comes up.
For more information about this read
Priest Hit Cap FAQ.
Also last thing, current number 1 ranked shadow priest (#2 overall dps) on shannox
http://worldoflogs.com/reports/rt-qo...&e=5153#Velran take a look at how many times he missed on that fight.