For me this is an information architecture issue all about defining who and what that html we spit out onto the screen is really for - what is it's purpose, and what user aims/tasks is it designed to help with.
This might only be applicable to sussex university users, but we had a large number of usability issues around the breadcrumb as a method of navigation in our moodle - those none clickable parts, the structure compared to a users mental model of moodle, names of stuff and the fact that the page you are on is a clickable link quite often to name but a few reported usability flaws.
On a smallscreen the breadcrumb can take up a lot of space, but in moodles current information architecture i understand how it can also end up being the only form of obvious navigation. Making any long list of navigation, such as the moodle breadcrumb, into a dropdown is a valid mobile (and desktop!) pattern used by plenty of sites. Having navigation/menus with mostly none clickable items is however not something i have seen any examples of elsewhere on the web.
This is very Student/Tutor focused, but Paolo did some amazing work - http://blogs.sussex.ac.uk/elearningteam/2011/07/12/moodle-breadcrumb/ - and quite a bit more which transformed our breadcrumb into something more familiar for our users expectations of a breadcrumb for navigation, but this pattern might not work for everyone.
In conclusion - It's a pickle, and you probably need to go talk to/observe your users to see what they actually want and need from a breadcrumb.
If you think the pattern we used at Sussex for a breadcrumb http://blogs.sussex.ac.uk/elearningteam/2011/07/12/moodle-breadcrumb/ is one that would work for your users, maybe contact @paolo_oprandi and ask him to show you around?