Addressing lots of issues..
1. Psychiatrists' training in psychotherapy is more than adequate, and many choose to incorporate that into their practice. A psychology degree (undergrad or grad) is not necessary. Many psychiatrists collaborate with therapists (doctoral- or masters-level) in their community to do the therapy end of treatment. The reasons are multi-fold: yes, part of it is an insurance reimbursement issue. However, due to the demand for psychiatric care, and the shortage of psychiatrists in many areas, it often just makes sense to refer out. Often therapists can see the patients more frequently than the doctor would be able to do, enabling the patient to access more care, rather than less.
2. "Throwing medications" at patients is a misperception about psychiatry. More accurate is to say that more than 70% of psychotropic medications in the US are prescribed by primary care physicians and their associated midlevel practitioners: pediatrics, family practice, OB/GYN, etc. There are many opportunities to educate these providers about referring to a mental health provider (therapist) first to see if CBT or another treatment modality may be helpful in addressing the issues at hand BEFORE going immediately to medication. On the other hand, if you're a pediatrician with an angry parent telling you that the school refuses to allow the child back until they're on medication (happens ALL THE TIME), then you don't have 6-8 weeks to wait and see if the child responds to a behavioral modification program...
3. Persons with schizophrenia and other serious mental disorders CAN respond to therapy if it's appropriate. I am not suggesting that these disorders themselves will be cured or the patient will become asymptomatic with therapy. However, there are often comorbid issues which compound these diagnoses which may be addressed. I'm thinking along the lines of a patient with schizophrenia who is stable on medication, and starts to have some depressive and/or anxious symptoms which start to emerge as she begins to recognize the devastating effect of her primary illness on her ability to live her life (ie, decreased cognitive functioning preventing her from achieving school/career-related goals). Similarly, the Alzheimer's patient who is still coherent enough to understand what this disease means and how it will progress.
4. Although conventional wisdom may hold that psychiatry is not respected, this is becoming outdated. Within hospitals, consult-liaison psychiatry is a well-entrenched part of the medical team. And they're incredibly well-respected when that surgeon's spouse, parent, or child (or surgeon him/herself) requires a psychiatrist.
To the OP:
Psychiatry's a great field, and there's a lot of exciting research going on right now. Definitely go read the psychiatry sub-forum on SDN to see what people are up to. And just keep your mind open as you get into medical school- you never know what's going to jump up and grab your interest.