You are correct, and the answer is - no-one using publicly-trusted TLS certs for client authentication is actually doing any authentication. At best, they're verifying the other party has an internet connection and perhaps the ability to read.
It was only ever used because other options are harder to implement.
It seems reasonable for server-to-server auth though? Suppose my server xmpp.foo.com already trusts the other server xmpp.bar.com. Now I get some random incoming connection. How would I verify that this connection indeed originates from xmpp.bar.com? LE-assigned client certs sound like a good solution to that problem.