I don't mind FATEs as the main leveling content. Played as they are though, FATEs are really dumb. The most brain-dead videogame content I've played in years - if you could even call it playable, since it breaks the combat system into a challenge of targetting names and hitting a single button (if you don't have a character-centered AoE, then it is just the button). FFXI's Besieged rarely got this bad (though lag is another story). Way dumber than, say, Dynasty Warriors or something like that. I never really liked the idea: you can't make content where bad players have a negative effect on the battle or else players will become very frustrated by invading noobs. That greatly limits design (which they welcome with open arms since party play is "stressful", except when it isn't and they make dungeons mandatory). I thought they could make it work if they tried, but they didn't. I don't see this getting much better when serious FCs try to take down Behemoth and whatnot. Like they really need 100+ useless fodder, lagging things up.
I think people only find it "fun" because they get a kick from seeing big EXP numbers. It is empty calories though. I could see it negatively affecting experiences in subtle ways. Expectations of progression being one of them - just like certain type exp parties in FFXI just about killed slower methods of gaining EXP. Which is really bad if they remain as stupid as they are.