Perfectly elastic collisions and point masses are also impossible, but that doesn't stop physicists from using them in their models sometimes. A simplification can be theoretically useful even if it can't exist in reality, especially when you're studying something as complicated as markets.

And perfect competition does have desirable qualities, it (along with some other conditions) allows for maximum allocative efficiency, meaning that all goods and services are held by the people who value them the most.

And utility incomparability is not a big problem for Pareto efficiency, as its not that hard (at least conceptually) to work out whether someone is better or worse off. The incomparability of utility functions is a problem for <a href="http://en.wikipedia.org/wiki/Kaldor-Hicks">Kaldor-Hicks</a> efficiency, but that's not what we're talking about here.