And it is clearly wrong. There is SOME demand. I can point to people who have bought large amounts of SBD, even at $1 or higher (or course this is true because every trade has a buyer, and it has traded a lot at $1 or higher).

The price is a balance between supply and demand as you say. If there were NO demand, then the price of SBD literally would be zero. There is SOME demand, so supply has to be reduced to meet it.

Why the fuck do we do with sbd? Nothing.

1. We use SBD for the SPS. It was designed that way because of real world experience with the problems of using a non-stable coin for budgets.
2. There are many people who have always liked to hold SBD for its stability. The alternative for people who don't want to gamble on the value of STEEM is to sell the STEEM, taking the value off the platform entirely. That is not an advantage for either the individual or the platform, for various reasons.
3. There are other potential uses for SBD. As with SPS, any time high variation of value would be a problem. I believe SMT creation fees will be specified in SBD.
4. At one time in the past, someone set up a service with a payment card which could be used to spend and purchase SBD at par (so zero hassles with exchange rates, taxes, etc.), but it had to be dropped due to the SBD peg not being maintained. Improving the peg allows more use cases to develop.