I must be missing something...This seems completely pointless; who would pay the huge amounts of money being asked for this? Consequently, with no users why would anyone write software for this OS?
That's a gross exaggeration. C64 OS doesn't cost "huge amounts of money". It's $59 or $64, depending on which package you buy. And that's in Canadian dollars, not the more expensive US dollars.
A lot of retrocomputing is "pointless" if you're sporting a daily driver mentality. Almost nobody is going to do any serious word-processing or other important tasks using a C64. Not these days.
But you know what? C64 OS is a legit-working system, growing more capable all the time as new features are added. So if you were forced to use it for essential or semi-essential tasks, it might just get the job done, albeit much slower and less convenient than other ways.
At the very least, C64 OS is a fun demo, meant to dazzle you, your friends, retrocomputing show attendees, etc.
Lighten up!