Your logic defies basic reasoning. You have to understand that 1/oo is an infinitly small number. It does not equal 0, but it approaches 0. You can't say infinity equals anything because it is not a number.
This can be demonstrated by plugging in increasing numbers. You'll obviously see the trend that that the result gets smaller and smaller.
However, according to you 0 * oo approaches an undefined number. This is not true.
If you plug in ever increasing numbers, you get the same result each time, and the trend shows that this function approaches 0. No matter how infinitly high you make x, y will always be 0.
Granted, when you say 1/oo is 0, I assume you talk about limits, because it is impossible to pull real numbers out of any function with infinity.