As others have noted, the HH Value Equation makes sense when you:
1. Pay with your Amex HHonors card.
2. Book online to get the online booking bonus.
3. Redeem points at higher end properties that have daily rates in excess of $250 or more.
I don't think this is unique to HHonors, though. Every reward program has similar limitations.
No one in their right mind would waste 25,000 miles (domestic award ticket) to travel LAX-SFO-LAX, but it can make sense for a coast to coast trip.