Why conceptually we connect circuits to earth but in reality that doesn't really work?
It does work that way. The problem is that you are comparing an ideal concept of Earth (e.g. one uniform level of potential energy) with a realistic concept of a floor... and that doesn't work.

The problem is that the floor is highly resistive. The ground is too if you don't bury a large enough conductor deep enough (e.g. deep enough to access the underground water table).

I've revised your drawing as follows:







simulate this circuit &ndash; Schematic created using CircuitLab

In the top figure, you can see a more accurate approximation of your floor terminated circuit.

In the lower figure, you can see a practical approach to "earth grounding". This is how your machine is connected. The return path is shorted to the Earth, but not through the Earth. This connection ensures that the reference potential of your circuit is largely the same as the surrounding environment.

AC powered machines are usually connected this way as a safety measure. It ensures that if a power line inside the machine becomes disconnected and touches the metal chassis in error -- and you then touch the outside of the machine -- the path of least resistance will be through the ground wire to the Earth, and not through your body to the Earth.