Imo this works in large part because clients and (many) potential employers are not critical in regards to your point about the product's goals. So, although "worth close to nothing", it's still effective in the goal of impressing the masses. That's how I see it anyway.

On another note I have seen pretty good totally-new-feature-addition type redesigns. I agree with your comment more regarding purely visual (and minor functional) style redesigns.

I do think however you can make an interesting case redesigning a product you use very, very frequently, addressing a problem you personally have. As long as the work is prefaced with that, then I think these types of redesign are a harmless and still a good (and fun) exercise to improve ones' craft.