Are we really allowed to do that or was that person just confused? I don't see why anyone would buy a mobile sim with double the cost/bandwidth ratio
Yes you are really allowed to do that.
As to why "anyone" would buy a data SIM:
- you kind of answered that by asking the "are we allowed" question...
- some people know you didn't used to be able to do it on some networks and assume you still can't
- some people have no idea that a phone SIM could ever work in a router
- some people have no idea that you can put your own SIM in a router and just buy a router with a data SIM already in it
- the networks (generally) make it very unclear that you can use a phone SIM, if you go on to most of their websites looking for home broadband over 4G they'll push you towards a router with a data SIM in it