Good catch - you are mostly right. Here is a quote from the man page:

GNU EXTENSION
       The glibc2 version of this function has the following  addition
+al  fea-
       tures.   If  salt is a character string starting with the three
+ charac-
       ters "$1$" followed by at most eight characters, and optionally
+  termi-
       nated  by  "$",  then instead of using the DES machine, the gli
+bc crypt
       function uses an MD5-based algorithm,  and  outputs  up  to  34
+  bytes,
       namely  "$1$<string>$", where "<string>" stands for the up to 8
+ charac-
       ters following "$1$" in the salt, followed by 22 bytes chosen f
+rom  the
       set [a-zA-Z0-9./].  The entire key is significant here (instead
+ of only
       the first 8 bytes).

       Programs using this function must be linked with -lcrypt.
[download]

++

Leonid Mamtchenkov aka TVSET