As for grouping into words, other languages have found spaces useful. ; )
In Japanese, it's related to something called the "accent nucleus." Googling that will give you a lot of random scholarly articles. Oddly enough the best simple explanation I could find was this:
http://answers.yahoo.com/question/index?qid=20100122132557AA...
There's just so much nuance they convey that the language would be less expressive without kanji. Even if they are a pain in the rear to study.
Yeah... about that. Do you really need two different phonetic alphabets? I mean, c'mon! Give a lazy gaijin a break!
"Katakana are not used only for foreign words. Katakana are also used with onomatopoeia, newly coined words, names when you don't know the kanji, and more.
Furthermore, katakana can be used to vary the style in writing. It is not uncommon to see an entire sentence in nothing but katakana, often to express a certain emotion (even when it lacks foreign words altogether). In other words, ヲ is actually used once in a while.
In addition, in ancient times, katakana were considered the proper way to write the language, while hiragana were considered sloppy and vulgar. In this respect, katakana can be used to evoke an archaic style. "
In writing homonyms use different kanji so there is no problem differentiating them.