Exhausting the entropy of a hash function
Entropy is not gas -- you do not "consume" it.

In the case of hashing passwords, entropy is a measure of what the password could have been. A password with "$n$ bits of entropy" is a password such that breaking it by dictionary attack (trying potential passwords until the right one is found) has average cost $2^{n-1}$.

It is useless to have a password entropy much beyond the output length of the employed hash function, because if you hash to $k$ bits, then trying random passwords will succeed with probability $2^{-k}$, hence average cost $2^{k}$. Thus, no need to go beyond $k+1$ bits or entropy for the password.

It is also useless to have a password entropy beyond the point where dictionary attacks are ludicrously expensive, regardless of the hash function output size. With today's technology, an 80-bit password entropy is already enough to defeat such endeavours. Actually, if the password hashing is done properly (with a slow password processing function, like bcrypt), then lower entropies are already fine (that's the point of slow hashing: to make low password entropy more tolerable).