Can OTP be made practical by using stretched hash algorithms?
You are creating a key stream using a hash function. This is often called a stream mode of operation (although it doesn't seem to be a well defined term). This is a known method of creating a key stream.

An OTP requires the key stream to be completely random. This is because it would otherwise be possible to brute force the key. If you can brute force the key then the scheme obviously does not provide perfect secrecy; meaning the scheme is not an OTP.

Problem is that it is extremely unlikely that there are two passwords that would provide a stream for which the resulting plaintext makes sense. So if you find the password you're pretty certain that you've hit gold. The longer the decrypted plaintext is, the more sure you are that the password is correct.




  It should be impossible to verify that a given password is correct though as all passwords create an OTP with a different outcome producing possible legit words.


Seems contradictory to the last paragraph. It's not correct.


  The amount of computing power is also an advantage as the creation of such a big key can take a lot of time and is memory expensive.


Perfect secrecy is the notion that the scheme cannot be broken regardless of the amount of resources.



Instead of using a hash function we normally use a block cipher such as AES. If you combine that with a counter then you have AES-CTR. CTR is an extremely common way of building a stream cipher.