I've moved onto Level II, and the exercises get very interesting--how about a pima arpeggio, where p plays on 6th, i on 5th, m on 4th, and a on 1st? How about doing that with free stroke p, rest stroke ima, then reverse it?
These are unique and challenging exercises, and I will probably never do something like that in a performance situation. So why practice it? Well, because by pushing boundaries, you become more confident and comfortable within the boundaries of your performance technique. You strengthen and stretch beyond the requirements of performance!
This philosophy would be difficult, if not impossible, to realize by simply using performance pieces as exercises.
Think about, say, an Olympic runner who specializes in the 5K. In training, why don't they simply repeat 5K runs at or near performance level?
Why do they run hills, when they compete on a flat track?
Why do they run 160 km a week, when their event is only 5 km?
Why do they run 16x400 meter intervals at much faster than race pace, when they do not require such speed in their race?