Yes, they could use your images in their advertising, or publish a book of your images, or make a movie out of all your messages and videos, or anything else they wanted to do with, as they call it, "Your Content". That's what a perpetual, transferable, worldwide, royalty-free, sublicensable license to create derivative works is.
And no, all those rights are not required to operate Discord.
So what you're saying is that when you grant someone the right to use your content for a specific purpose, you're actually granting them the right to do whatever the hell they want with it?
Again, not a lawyer, but "in connection with operating and providing the Service" reads like a legally important part of that sentence to me.
"Service" in this context is defined earlier in the document:
>the Discord application (the “App”) or the website located at https://discordapp.com (the "Site"), which are collectively referred to as the “Service,”
IMO you're reading this very creatively if you think that grants them a right to publish a book of your private messages. Rights to use your content are granted specifically "in connection with operating and providing the Service." A book of your messages is not in connection with operating/providing the Discord app or website.
In order to host your (automatically copyrighted) content on their server and display it to other people in your chats they need your permission, so you have to give it to them if you want to use Discord. Without it they would be infringing on your copyright by hosting your content on the service.
I'm not sure how else you expect it to work.