First of all, please keep in mind that transliterating English-origin words is only one of the many roles of katakana. I strongly disagree with this statement:
Katakana that is used to represent Japanese words is not the proper usage.
Katakana was invented long before Japanese people encountered western civilizations, and it's been an essential part of Japanese orthography for more than 1000 years. Even if I had to stop using western-origin loanwords altogether, I would still need katakana for many reasons. Countless Japanese-origin words are normally written in katakana, and they include onomatopoeia and slang words. It's not "overuse"; it's just how katakana works.
What are some ways in which katakana is beneficial to Japanese people?
It can help us remember which word is of western origin :-) Of course that's only one of the reasons. Having two similar sets of phonetic symbols is redundant in theory, but it helps us read things smoother, and it's especially true for a language that doesn't use spaces to separate words. I believe you also understand the merit of having two "cases" in English character set.
What are some ways in which katakana proves detrimental?
The knowledge of your mother tongue will almost always work detrimentally when you learn a new foreign language. It's advised not to use katakana if you want to seriously master English pronunciation, and vice versa. Definitely we must not overuse katakana in this regard, but of course this is not a problem specific to katakana.
Katakana is currently being used in Japanese popular culture and is used in a lot of internet slang. The use however confuses many Japanese especially students into thinking that those foreign words represented in katakana are actually from Japanese origin. I have had students who even think 'Good Bye' or 'bye bye' is originally Japanese. This is a problem when it comes to learning English.
Admittedly, there are a few obscure cases because katakana is not exclusively for western-origin words. Few people remember the origin of words like ジゴロ, ヤクザ or バンカラ. Today virtually everyone understands オタク, イケメン and リケジョ are not western loanwords, but some people may forget their etymology after 50 years.
That being said, abandoning katakana will make the situation much worse. Many Japanese people no longer remember that たばこ and てんぷら are originally western words, and that's because they are often written in hiragana these days. But almost all Japanese adults know バイバイ is an English-origin term, and that's because it's still usually written in katakana. English has no equivalent of katakana, and thus English speakers have forgotten the etymology of many words they use (examples).
Katakana is not perfect, but having it is better than abandoning it, IMHO.