Miss Launcher

When I use the Miss Launcher, it simply drops a missile, it bounces, and explodes.
Is it meant to do this?

Yup. It's called the MISS launcher for a reason. The Brotherhood Outcasts worked on the Missile Launchers to make them more powerful, and came up with the Miss Launcher. Because it doesn't fire it's rocket, it doesn't burn any fuel, and uses that fuel to increase the explosive power by 30%. However, this also limits the range and makes it harder to aim. Just think of it as a grenade launcher. Oh, and don't use it in VATS, because the AI will treat it like a normal Missile Launcher and fire without angling, resulting in the missile missing every time, except at point-blank range.

I thought it meant like Mrs. launcher before she was married.

Well, that's pretty useless now....