That may well be what early adherents of a particular faith (I'm not sure if they called themselves Muslims then, but that's the term commonly used today - at any rate, I'm referring to followers of Muhammad, the people that followed his teachings) believed. For identification purposes, today we might call them traditional Muslims or originalist Muslims or fundamentalist Muslims - something to identify them as adherents to an early version of that religion, ones who still hold to the idea you refer to. There are (apparently) still some people who follow or practice that version of Islam, perhaps even a meaningful number that do.
But that's not what Islam is today - that's not the typical version of it, that's not the predominate belief that goes by that name now. The vast majority of people who identify as Muslim today do not adhere to that belief, they do not hold all the same views as were held by Muslims in the beginning and at earlier times. (If you want to ask how I know this, fell free.) And that's their prerogative. People can have whatever religious beliefs they want, they can modify other religious beliefs and adopt the modified version as their own - they aren't bound by what others believed. And they can use a general name (like Islam) if they want.
A similar thing is true of Chritianity today. The vast majority of people that identify as Christian do not take literally everything that is said in the Bible. They don't hold as rigidly to some of the concepts that earlier Chritians did, they don't follow all the same practices or espouse all the same ideas. In a way, there are newer versions of ?Christianity - they just use the same general name. And, similarly, they may well still be what we might call fundamentalist Christians - those that do hold rigidly to what the Bible says in every regard and espouse all the same ideas as earlier Christians. But they don't represent the majority of identifying Christians today, and they don't own the name Christian. A given Christian believes what they choose to believe. A given Muslim believes what they choose to believe.
So... anyway... there are s lot of identifying Muslims in the world. Most of them aren't what we might call fundamentalist Muslims. They are something meaningful different in that they don't advance the traditional Islamic notion you refer to. They practice a religion, just as Christians do - just as Budhists and Hindus and Jews and Waashats (?) do. Yes, the nature of respective religions may be very different from that of others. But that's the point of religious freedom, you don't get to decide whether their beliefs are valid. You don't get to precisely outline the contours of what something must be in order for it to be a religion. Islam is, for the purposes of the American notion of religous freedom, a religion - at least to the extent that adherents assert it as such. It may be other things as well - all kinds of descriptors and classifications may be applicable. But it is a religion, even Founders recognized it as such.
And just to be clear - even though I took the time to distinguish the more prominent versions of Islam from the less prominent versions that hold to the belief that you refer to - those less prominent versions are religions as well. Human history is replete with belief systems that taught absurd things, many of them are still regarded as religions - religiosity doesn't hinge on the reasonableness of beliefs or even the absence of the advocation of violence.