As what they are for, I use ueberzug and something like entr (tool that watches a file for changes) to display the output of programs that generate images, without having to either open the image manually or open a new image viewer through scripting. Another use I had for it was to visualize a syntax tree of an expression when I was writing a compiler, to ensure everything made sense in a more visual way. I don't know if it has any use for sysadmin tasks, to be honest, but for my hobby programming projects it's rather useful.
As you note at the end there are tools to do the blocks thing, like Sixel (it's mentioned elsewhere in this news' comments) but you will need to watch out for size and colors. Representing a large, complex image over sixels is a bit meh, but for smaller ones like say 160x144 it should work.
That said, I do agree with you. I also think any image viewing functionality needs to have a practical way to get that image sent through the same channel as that terminal connection itself so that if you're on it remotely it will still work...
Ncurses-style CLIs have the benefit of being usable over bad connections and on headless boxes. I can't see why you would want to display an image in your terminal if you're already running a graphical session, and presumably have an image viewer installed.
[0]: turns out there are programs which turn images into blocks of coloured characters, and therefore do work over SSH.