Most people on most bikes can only take so much grade before climbing becomes impossible. A maximum grade setting would be very helpful for that exact reason.
My reasoning for the bike-hike being faster is that legs are designed for it. Legs are only inefficient on flatter ground because you have no equivalent of high gear (like extendible legs), so all that torque is going to waste.
Legs have to start, go up, go down, stop.
Wheels go brrrrr.
And almost any practical routing system will have a mechanism for tradeoffs of different aspects. Often there is a distance/time tradeoff which directly relates to speed on corresponding segments. But the tradeoff can also be in the form of "on average x seconds spent waiting green light in each intersection or time to stop before railroad crossing. So there is no reason for a system optimizing grade to completely ignore all other factors, it's just a question of weights and curves of each of them.