It stops by far most people from driving. The ones who are undeterred and keep on driving without a license are then fair game for the criminal justice system.

Even if this minority gets away with continue driving without a license and wont get punished, you still save many lives by taking the vast majority of drunk drivers off the road. That alone is worth it.

No, but it opens up the path to actual jail time, which would get them off the road for good.

This is a good argument for having a robust and useful public transportation system, as well as designing cities to support such a system. Won't happen in the US in my lifetime, but one can cream.