Bob is thinking that he would have had a nicer time earning his $100 waiting tables for 10 hours.
If that job's available, why doesn't he do it instead? If it's not, what's the point of focusing on his wishing - he might as well wish he were a millionaire.
The missing detail in your story is what Bob did to earn money while Carol's machine was working. If he was doing something better than hand-making widgets, he wouldn't go back to widgetry unless he could sell at a higher price. And if he was doing something less good than making widgets, he's happy that Carol's machine burned down.
Another point is that if Carol's machine can make widgets more cheaply than Bob, then it might make more them, satisfying more market demand. This should cause GDP to rise since it multiplies items sold by price. How common is the case of very inelastic demand (if that's the right term)?
These points probably shouldn't change your conclusion that GDP is often a bad measure.
Disclaimer: I'm even less of an economist than you are.
If you believe that science is about describing things mathematically, you can fall into a strange sort of trap where you come up with some numerical quantity, discover interesting facts about it, use it to analyze real-world situations - but never actually get around to measuring it. I call such things "theoretical quantities" or "fake numbers", as opposed to "measurable quantities" or "true numbers".
An example of a "true number" is mass. We can measure the mass of a person or a car, and we use these values in engineering all the time. An example of a "fake number" is utility. I've never seen a concrete utility value used anywhere, though I always hear about nice mathematical laws that it must obey.
The difference is not just about units of measurement. In economics you can see fake numbers happily coexisting with true numbers using the same units. Price is a true number measured in dollars, and you see concrete values and graphs everywhere. "Consumer surplus" is also measured in dollars, but good luck calculating the consumer surplus of a single cheeseburger, never mind drawing a graph of aggregate consumer surplus for the US! If you ask five economists to calculate it, you'll get five different indirect estimates, and it's not obvious that there's a true number to be measured in the first place.
Another example of a fake number is "complexity" or "maintainability" in software engineering. Sure, people have proposed different methods of measuring it. But if they were measuring a true number, I'd expect them to agree to the 3rd decimal place, which they don't :-) The existence of multiple measuring methods that give the same result is one of the differences between a true number and a fake one. Another sign is what happens when two of these methods disagree: do people say that they're both equally valid, or do they insist that one must be wrong and try to find the error?
It's certainly possible to improve something without measuring it. You can learn to play the piano pretty well without quantifying your progress. But we should probably try harder to find measurable components of "intelligence", "rationality", "productivity" and other such things, because we'd be better at improving them if we had true numbers in our hands.