Yes, the retag privilege is useful on medium-to-heavy-traffic sites. It is useful because retagging allows a question to be directed towards the people who are best suited to understanding it, possibly editing it into shape (when that requires knowledge of the content matter and not just of English), answering it or closing it.
I don't think the retag privilege is useful on low-traffic site where many users read all the questions. It probably doesn't help so much on Stack Overflow now that suggested edits are reviewed very quickly. On intermediate sites, where many users filter questions on tags, it's very useful to have questions' most important tags sorted out as quickly as possible.
To give a concrete example: when I joined Stack Exchange, I started participating on Super User. I gave up after a few months. My primary reason (not the only one, but the most decisive one) was that I got to see an awful lot of posts that I didn't care about. I'm a Unix guy, so I don't care about all of these Windows questions. But I wasted a lot of time sifting through many Windows questions that didn't have tags that allowed me to ignore them. Situations like these need more retaggers, and quicker retags. Removing the retag privilege only makes the situation worse.
The user interface was recently made very confusingrecently made very confusing when retagging and suggested edits were merged. Retags now have exactly the same user interface as suggested edits, which in itself isn't a bad thing. What is bad is that there is an incorrect explanatory text that tells the user that his edits will be peer-reviewed (no, that isn't the case for a tag-only edit), and also that the user must enter an edit summary which is then scrupulously ignoredmust enter an edit summary which is then scrupulously ignored.
There is a simple fix to the UX confusion, which is to make it less confusing. Tell users with the retag privilege that tag-only edits will take effect immediately, and don't require an edit summary.
Of the reasons against you cite, we've seen that #1 (unnecessary) and #2 (confusing) are wrong. #3 is no reason at all: just fix the bugs. Of the reasons for, #1 (motivation) is corroborated by the data you give for SO, #2 (load on reviewers) is not critical but still nice, and #3 is also a good one (there are plenty of metas where all the questions are tagged
[discussion], and what do you mean you can have more than one tag?) — though admittedly suggested edits would do in that case, if only they were possible. But the most important reason for is that retags are useful.