Certainly the only stuff I watch through a media player is stuff I couldn't find on iTunes, Netflix, or Amazon. I'm sure there are legit use cases, although none spring straight to mind, except for people who encoded a bunch of their DVDs a decade ago.
I record TV with Windows Media Center. While I can use an XBox 360 as a Media Center Extender, buying a bunch of them is a bit ridiculous. We use Plex to stream that content throughout the house. It's not as nice as having a native extender, but it works quite well.
The vast majority, yes. Plex is built for pirates.