The problem wasn't so much toxicity, which does exist to a degree, but risk of death by suffocation by oxygen displacement. That takes a lot of halon.
"A lot" is right -- about ten times the effective extinguishment concentration for Halon 1301. However, with 1211, the toxicity level is only about three times the effective extinguishment concentration, which is why that minimum room volume limit is important.
And I was under the impression that the amount of Halon to chemically interrupt combustion was much less than the amount of halon necessary to displace oxygen enough to endanger life. But I've heard the same thing you've heard regarding halon dumps in confined spaces.
One of the problems in discussing Halons is that there are over a dozen different compounds called "Halon", some of which (like 2402) are
highly toxic, and others of which are virtually non-toxic (like 1301). 1301 was the "silver bullet" in that it wasn't toxic in any concentration (suffocation not being the same as toxicity) and extinguishes fires in pretty low concentrations (2-6%, depending on the type of fire). The only problem with 1301 is that due to its low boiling point, it's primarily a volume fill agent, and loses effectiveness when you're trying to put out a point or streaming fire rather than a large volume fire. That's why 1211 is added to the mix for aircraft extinguisher. While it adds streaming capability, it also adds toxicity, so it's used in a mix with 1301 to maximize effectiveness while keeping toxicity to an acceptable level.
Only problem is all those brominated Halons (the fourth digit in the number showing the number of bromine atoms in each molecule) is that the bromine which kills the fire also makes holes in the ozone layer, and the ozone depletion potential (ODP) of 1301 is unacceptably high. We played with 13001 (replacing the bromine atom with iodine), and while it was even more effective than 1301 in firefighting, it also has serious cardiac sensitization issues, and was deemed unacceptable for that reason.
Where you can use large quantities of agent (like computer rooms on the ground, etc), several non-toxic, non-ozone-depleting agents like FM-227 were determined to be acceptable H1301 substitutes, but the quantities of agent required and problems with the post-fire environment (particularly concentration of hydrofluoric acid due to pyrolization of the agent) made them unacceptable for places like aircraft cockpits/cabins and ground combat vehicle crew compartments where occupant egress isn't an option (e.g., you really don't want to have to jump out of your M1 tank in the middle of a battlefield).
So, the ozone-depleting Halons remain approved for aircraft cockpits and cabins and are the agent of choice in that application.