Incautiously using race just because it reflects those existing biases would be a problem. This is what lots of humans do, overestimating the information provided by their own inferences of race. Like internet assholes who blather about how it is rational to be afraid of black men because of their higher rates of assault. Never mind that the absolute rate is still so low that there is ~0 predictive power from the race of a given individual.

It doesn't get used because people are innumerate and reactionary.

But the model is amoral. It's (morally) neither good nor bad for utilising certain features.

If it turned out that race was the most accurate attribute for a particular situation, it would be nonsensical ignore it.

The current trend of trying to paper over biases, while generally born of noble sentiment, probably only perpetuates the problem. Because it's usually done far down stream, and doesn't necessitate change at the source. Functionally, it's like a cover up by a large corporation

Only if you are optimizing for prediction accuracy. If you want to optimize for something like "justice" or "citizen wellbeing" then you might want to come to a different conclusion