My sump pump sits in a hole in the ground under our cement floor, is this as bad as I think it is?

A properly installed system should cover the pump and pit. The lid should allow water in without allow the moisture out. A pit without a lid can allow a lot of pollutants into the home, perhaps radon, bacterial byproducts, parasites, attract insects, some molds, especially the humidity. Speak to a water-proofing contractor that can help you complete the system you have installed. I know of a website with a great blog and forum where you can ask questions without hiring anyone to do work (not that you can't hire them, if they're in your area, but it is nice to get information without pressure sales) - www.americanbasementsolutions.com.