Correct. The $750k number is the cap on the debt for which you can deduct paid interest from. So, if you borrow 1 million dollars to buy a house, you only get to deduct 3/4 of the interest now, instead of the full amount. Interest on smaller loans continues to be fully deductible.

Doubling the standard deduction may have a perverse inventive against borrowing less (or simply buying cheaper homes) as, depending on your situation, it may be better than itemizing.

I think it's debatable whether the mortgage interest deduction really plays heavily into a noticeable amount of people's decision to buy or not; unless you are having a hard time deciding to buy or rent, there are a lot of other, larger factors.

Finally, I believe that doubling the standard deduction and eliminating a number of other deductions is a small, first step towards creating a simpler tax code- such a code wouldn't be as useful for social engineering (help middle class buy more small homes) but there are plenty of benefits, too.