We do still need it. Any time to need to scroll through any extremely long list in order to find a single particular item, the scroll wheel beats the manual binary search of scrollscrollscroll... too far... scrollscrollscroll back... too far... etc.
I would, unironically, use a device that had that iPod interface as a music device until my dying day. Make it only able to stream from Apple Music, make me load up songs through USB -- I'll do it.
Someone is working on a drop-in modern motherboard replacement for old iPods that will do all that:
Once your music library gets to hundreds of artists and albums, scrolling through all that with a scroll wheel is so much slower than an interface where one can just type in a few characters and get the desired artist/album/song.
Just before Covid I got nostalgic for the iPod and got a used one and put in bigger storage and Rockbox, but it was precisely the cumbersomeness of the scrollwheel that caused me to give it up and go back to my phone.
I have a logitech mouse that allows you to unclick the scroll wheel so you can scroll at tremendous speed (the scroll wheel has a bearing). I highly recommend this both because it's surprisingly useful and because it's incredibly satisfying.