It has been implemented because the SL mesh format requires to have LOD models. It's often a good idea to bring in models early in development, to see what works, and what has to be changed. It's also a quick indicator what the land impact will likely be, by playing with the LOD dials in the importer. Then you know for what to aim for, for handmade LODs.
Creating 3 more LOD models, with their materials requirements before you can bring a model in-world, would be quite inconvenient for creators. For that matter GLOD was quite a good choice, because it's extremely fast (and free of course). It was never meant to be used for finished models.
It's also easy enough to create crap LODs in Blender, Max or Maya. I'm pretty sure, if the SL importer wouldn't have the LOD generator built in, the usual suspects would just create what we call "zeroed out" LODs within their editor of choice to abuse land impact.