Based on current rules they wouldn't included in the S&P 500 for at least several years even based on optimistic scenarios.

Of course IIRC they looking into tweaking the rules to allow some handpicked extremely unprofitable companies in, due to "reasons"....

Maybe. If you read the fine print they are not. They have the goal of matching the index returns, but they never say anywhere they have exactly the stocks in the index.

Index funds all make active choices and often hold companies not in the original index. They are more passive than a traditional funds that buys and sells all the time, but they still make active choices. When an index changes stocks they can look up the price - but the funds mirroring the index need to make real trades that if not carefully done will change the value of the stocks (and cause the fund to under perform the index), so index funds have plans to prevent this. Compared to a traditional fund an index fund looks passive and there is much much less for the manager to do - but that doesn't mean the managers do nothing.

Most index funds wait for at least a year before adding a new listing. The only exception that I'm aware of is QQQ and SpaceX.

company must have a history of profitability before being included in the S&P 500

Index funds follow indices and often only rebalance quarterly

you and me will all be left holding a small cut of the bag

But only the amount the company floats for many index funds. So in the case of SpaceX, they are only floating 5% of the company. So the number of shares something like VTI has to buy is much smaller than the total market cap (5% of it).