I think one reason the US is obsessive about it is because the US is so multiethnic. I, personally, support certain kinds of race-based affirmative action because of my social psych background. I know that internalized societal perception of ethnicity can mess artificially with performance (did you know that you can lower the performance of high-performing black kids relative to white kids on academic tests by simply reminding them that they are black with an ethnicity question beforehand? or by telling them that the test measures innate aptitude, thereby triggering their internalized ideas of blacks having less innate aptitude?). And I know that unconscious bias is quite pervasive, and thus think that aggressive measures to counterbalance it are an unfortunate necessity.

So I do think it's appropriate on college applications (it lets schools take countermeasures to the effects of societal racism). I think it's probably appropriate on the SATs, for statistical purposes (but should be at the end of the test, not the beginning - see my previous paragraph). I just think that you shouldn't be confined to one box. And why they need it for a driver's license, I haven't the faintest idea.

Applying to grad programs, I liked Tufts' implementation of the race/ethnicity question. They had a long list of identities (generic ones like "White" or "Native American", and specific ones like "White - Middle Eastern" or "Black - Caribbean" or "Hispanic/Latino - Puerto Rican"), and you could choose up to five. They still didn't have an "Other" - I guess they figured that between the generic categories and the specific ones, and the up-to-five-boxes part, they caught everyone. Northeastern, on the other hand, has the "Pick one: White, Black, Hispanic/Latino, Native American, Asian" version with no "Multiracial" or "Other" option.