I think you could have shortened your question to "why have a Downloads folder?"
Downloads folders are where files go to sit unused. I personally send everything to my desktop so files won't sit out of sight forever, but I think in a browser which is meant to be simple that asking where they want the file is a good choice. Why defer user action to a time where they have to do a large amount of a boring task when you can ask them to do it right there when they're most likely to know what they want to do with it?
Downloads folders are where files go to sit unused. I personally send everything to my desktop so files won't sit out of sight forever, but I think in a browser which is meant to be simple that asking where they want the file is a good choice. Why defer user action to a time where they have to do a large amount of a boring task when you can ask them to do it right there when they're most likely to know what they want to do with it?