As you note, the relatively short range of most torpedoes was one of two main reasons why arming battleships with torpedoes was a bad idea. The Royal Navy's 21in Mark II***, used on capital ships during WWI, had a range of 10,750 yards at its lower speed setting (31 knots), but at its higher speed setting (45 knots), its range was just 4,500 yards. For comparison, the 12in Mark X used on Dreadnought had a maximum range of 18,850 yards, with later guns having much higher ranges. During WWI, it was found that battlefleets tended to exploit the long ranges of their guns, never closing to torpedo range. As a result, cases where the torpedoes could be used were rare, and the tonnage and space devoted to them was wasted. There's only one case where a battleship torpedoed another in combat, when Rodney torpedoed Bismarck in 1941. This was an extreme case - Bismarck had effectively been battered into a hulk by long-range gunnery, and was effectively unable to manoeuvre to escape as the RN closed in to torpedo her.

The other reason was that torpedoes and the spaces devoted to them posed a major threat to the ship should they be damaged. Above-water tubes had to be placed outside the ship's armour - not where you want to place a few tons of explosives and fuel. Hits to these could start major fires, or even detonate the torpedoes. This was a frequent problem with Japanese cruisers. At the Battle off Samar, the cruiser Chokai was struck by a 5in shell from the escort carrier White Plains. The hit detonated her torpedoes, heavily damaging her and ultimately causing her scuttling. Similarly, at Midway, bomb hits detonated torpedoes aboard Mikuma, also causing her loss. This wasn't confined to the IJN though. A theory proposed shortly after the sinking of Hood suggested that it was the result of an explosion of her torpedoes, though this was ultimately dismissed as later experience suggested that this would require more time than was actually available. Underwater tubes were protected by the sea, and to some extent by the ship's bulk. However, they were typically placed outside the ship's heavily armoured citadel. This was unfortunate as they required a large space with no subdivision below the waterline - if they flooded, they would seriously affect the ship's ability to survive. The sinking of Lutzow at Jutland was primarily the result of flooding in this area.