1.) Creating subforums for every popular game wouldn't do much good because most of them would be dead. For example, Starcraft is an extremely popular game, but there isn't much to discuss about it. It stays death, even when a member or mod actively tries to resurrect it.
2.) That hammer keeps certain members in line. In my opinion, it has been used frivolously in the recent past, but it does keep members in line. A member is much more likely to listen to rules that a staff member tells them than a rule that a normal member tells them.
3.) Getting rid of the Flame Forum would do no good. There are threads whose sole purpose is to flame people. That would not fit in anywhere except the Flame Forum. Plus, the Flame Forum is a fun place to many members, including myself. Some of Zelaron's funniest comments have been made there.