I have never had a need for this feature

Maybe you keep all files in a project open always. But as you mention, this makes it harder to switch to the document you need. It is also impractical for slower systems as it slows down opening a project and uses more memory.

I would use this e.g. when I've finished looking at files in the ctags subfolder. It's also useful when I've opened a folder in a current project and would rather it was in a separate project. Currently I save the project and copy the project file. Once I implement Open in New Instance for this pulls Documents in Folder menu, it will make splitting a project a bit easier.

it will only add more stuff into an already (usually) massive menu,

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