People practice karate for a variety of reasons, including self-defense, physical fitness, esthetics, biomechanics study and as a competition sport. Similarly, kata practice can involve various training ideologies and can enhance the overall training experience no matter which of the above reasons one may study karate. The study of the self-defense applications of the movements is just one of the ways to train kata.
Application is just one method of analyzing kata movements.
Oyo is a subset of bunkai , as application is a subset of analysis. Some consider there to be 5 or more levels. Breaking out of grabs. In my opinion, there is nothing wrong with studying the first level to the point that those applications become part of the practitioners' subconscious. But let's not forget that Shotokan and most other styles of karate up until about the 1920's involved practice of kata only.