I've seen it used against people spouting QAnon, Big Pharma mind control vaccine theories and support for fascist elements of various governments like USA, China, Turkey, Russia, and Poland. Seems appropriate to me. It's not healthy to tolerate these folks, especially the fascists.
Yes, in a good-faith discussion between two parties, not taking them seriously is a quick way to lose ground with lots of smart people and further fringing the people already outside of the normal "accepted" thoughts.
I’ve only seen it being invoked on people who support the freedom of speech. The people who invoke it obviously missed the irony that based on the paradox of tolerance the way to keep our freedom of speech is to pull a GPL and silence these that disagree with it.