Since the online catalog started shrinking, the DVD division is more useful. The DVD rental business has first-sale-doctrine rights; Netflix can rent those DVDs even if the studio doesn't like it. They don't have that right online, and have to cut a deal each title.

Yes but are people still using it? Personally I don't really care how big of a catalog they have, I'm not going to wait 2-3 days for a movie to arrive.

Yes. I like movies, and a service that only has a limited selection of crappy movies isn't that interesting to me. I don't really care if it takes a couple days to arrive. I can see the attraction of the streaming service if you are into the TV series that they have, but it's not even a competitor for movies. I would love to sign up for a full catalog streaming service, but it looks like that will never happen.

Use the DVD system to recommend, then torrent? That's isomorphic to having Netflix drop the DVD into a block device and letting you access it over a long cable, so you shouldn't have any ethical issues.

Well... you can get a few movies at a time, so you're not waiting once you get them all... you just return the one you're done watching and the next one arrives so you always have a "stash." If you're watching more than two or three movies every two days, maybe you should get out a bit more.