The Inuit snow thing is actually a common misconception and like you mention it comes from a difference in our understanding of what a 'word' is. The Inuit language typically uses suffixes to modify nouns. Also, the Inuit language can use one 'word' for what otherwise would be a phrase in English.
Reading Chaucer is a good exercise for looking at how words are used, in "The Canterbury Tales" the word Horse is rarely (if ever, I'm not sure) used, instead very specific words are used to describe the type of horse in question Palfrey, Charger, etc.
In the modern world, we are the same with motorized vehicles, I drive what my wife likes to call a junker, beater, jalopy, hoopty car,
We make the distinctions that are important to us, that doesn't meant that we aren't capable of making finer distinctions if we need to
Wiki has more on it: http://en.wikipedia.org/wiki/Eskimo_words_for_snow