A lot easier to work with? Is running a linear regression that hard?

Yep. Remember, every step of statistical sophistication is a filter. Some people who understand means will not understand correlations; some people who understand correlations will not understand standard deviations; some people who understand deviations will not understand t-tests; and everyone won't understand p-values judging by how often I see the '5% odds this was due to chance' fallacy even here on LessWrong. Linear regression is another step on top of that, etc.

The courts thing makes more sense, though I'd be surprised if courts couldn't understand percentiles fairly well ("more psychopathic than 94 percent of the population").

What does that even mean for the court, though? They aren't judging the overall population; heck, criminal defendants aren't even a sample from the overall population but are heavily biased towards particular places, races, IQs, and annual incomes etc etc.

Another theory is that, the first success stories of identifying things in psychiatry and treating them came from things which are discrete so there's a tradition of treating things that way, and the contrary evidence doesn't hit them in the face.

Psychiatrists are the first to talk about how so many things are continuous, and these days disorders as continuous phenomenon is dogma, so I doubt it's a psychiatry thing. It's not like medicine in general doesn't use tons of discrete cutoffs. (If your vitamin D blood level is below 20 or whatever, you Have A Deficiency; if it's 21, you Do Not Have A Deficiency.) It's just much much easier.