I've often said the same thing. I think when there are too many, it's not useful (though in some very real sense, every artist is its own genre), but of course one genre is useless too. Some people say "why have any genres at all", but as someone who's tried to explore musical connections where I haven't been able to find established genre names -- like between old folk music from some smaller countries, or the continuum of music featuring accordions, horns (especially trumpet and clarinet), acoustic guitars/lutes, and strings that goes from Russia down to Turkey and beyond -- it can be really painful to find related music and artists without good genres.

The trick is a good balance, and I personally find that electronic music and metal (as another poster mentioned) have genres that are often too small for my purposes.

As someone who used to listen to a lot of metal: no.

To some degree, but no more than, say, the number of lisp-based programming languages or flavours of linux =].

In my mind it's something to explore rather than balk at. If you find something amazing like you've never heard before, then looking at the genre can help you to discover more things like it.

I know that quite a few of them were invented as a joke among music journalists over a Friday pint.

Only those lame llama-steampunk-subjitter-dub-foxtrot fans...