There really isn't much of a point to 16MP, but seeing how the camera comes with it, and how people will practically use it (i.e. downsample), there's really nothing you can do but accept that it's there.
Exactly. Megapixels only really matter if you're doing photo-editing or photo-printing. If it's being down-scaled - and it is, if you are uploading it to whatever social media site - then a 5MP iPhone 4 camera will serve you just as well.
Well, except for the part where high density, low area sensors tend to have more noise and poorer sensitivity. If you were to assume that the iPhone and this device's sensors were the same size (they're probably not), then the iPhone's images would generally turn out better.