Well, think about it....you need to crawl before you walk, walk before you run. While I understand that there are other ways, sometimes the simple kata may be the best way to address the basic(s) that need to be addressed. For example, in the Parker system of Kenpo, there is a kata, Short Form 1. Very simple kata, which consists of defensive blocking, while moving away from the attack. However, the things that it teaches are:
Various stances
Basic blocks
Timing of hands and feet
How to block while moving back
Angle changes
Staying low while in a stance
Using peripheral vision
Double factor blocking
I could list more, but I think you get the general idea.

Of course, as its been said, there are a huge number of applications contained in the kata. However, you need someone to be able to show and teach those applications. Simply going thru the movements, with no purpose behind them, is not helping one to really learn whats contained in the kata.
Now, I also think that the student should spar, and do other things, aside from kata, but the kata do teach the basic foundation that all students need. If your basics suck, everything else will suck too.