I thought of a possible use for Phoenix mode that is vaguely justified. PLEASE don't get me wrong - as far as full playthroughs are concerned, I wouldn't touch it with a ten foot pole.
So, let's say you were playing through the Nohr campaign, and towards the end of the game, you had a unit you hadn't used for whatever reason, and you wanted to try that unit (lets call him John for the sake of argument). You copy the save file, and change the copy to phoenix mode. You then try out the unit really easily, as you can grind him up to a decent level in one fight as HE CAN'T DIE!!! In the Nohr campaign testing characters would be nearly impossible as there is limited experience. Phoenix mode is likely not intended for full playthroughs, but to allow people to easily test things in the Nohr campaign. This WOULD make sense, as casual mode doesn't allow you to do this in only one fight, as the character will likely drop dead after a single hit, whereas phoenix mode prevents you ruining the story in a test fight.
Now I don't doubt that this is going to get shot to bits, but I thought I'd have my say, as no-one else seems to have thought of this. Also, I don't want to start talking to much about the weapon durability - could be good or bad depending on how they handled it. Phoenix mode is the same as casual for me - cool for newcomers, and the vets can just leave it alone.