The demo is important for beginners and newbies entering into forex for the first time. The demo account is useful to learn about live markets and can trade risk-free without involving real capital.
A demo account is used for those who are not yet familiar with the forex market, it allows you to study the market in a training mode without risking your own money
On a demo account, you can not only practice and gain experience, but you can also take part in some promotions.
A demo account needs to feel like a real account in your mind, as the training that you can get from it in a 'safe' environment is very important. There is obviously the security that you won't be losing money in case you fail, but you can practice strategies and get a feel of what can be effective in real trading ad what might probably not be.
Looks like you underestimate impact of capital constraints on trading. You have to be more cautious and make sure you cut the loss on live account however it comes at the expense of worsening winning ratio, as you have less cushion to withstand negative trades. Also if you traded a lot on live you would probably realize that transaction costs like slippage also cause great distortions in what you get on live account with your trading system compared to demo experience.