"What is the point of putting your stuff on VMs and then running them from one bunch of hardware? "
Not having to buy many bunches of hardware, each specced out to peak usage and hence idle 99% of the time.
You are absolutely correct that virtualization allows for the recovery options you mentioned.
However, you completely ignore the fact that virtualization was originally and still is most often sold not as a recovery solution but as a cost-cutting solution.
For public entities required to jump through hoops for every penny spent, and then still criticized by moronic taxpayers for any expense with more than three digits to the left of the decimal, no matter how well-spent,the natural tendency is to cut costs rather than to optimize. The net result is what you see here.