100% correct. Many audio and synthesis algorithms, including mine, perform LOTS of iterated exponential or high-polynomial decays on variables, such as x <- x * 0.1, or x <- x * x or whatnot. These decays rapidly pull values to the denormal range and keep them there, never hitting zero. Depending on the CPU, this in turn forces everything to go into microcode or software emulation, producing a gigantic slowdown. There are other common cases as well.

The only way to get around this in languages like Java, which cannot flush to zero, is to vigilantly check the values and flush them to zero manually.

Yes. It is very easy to accidentally produce denormals in recursive audio algorithms.

I agree that this happens, but solving such cases with FTZ is a lazy solution, which is guaranteed to give bad results, due to the loss of precision.

Even when 32-bit floating point is used, for a greater dynamic range and for a 24-bit precision, instead of using 16-bit fixed-point numbers, proper DSP algorithm implementations still need to use some of the techniques that are necessary with fixed-point number algorithms, i.e. suitable scale factors must be inserted in various places.

A correct implementation must avoid almost all underflows and overflows, by appropriate scalings.

I sympathize. Software/hardware is littered with one person's edge cases being another person's entire world. But in the grand scheme, yes, subnormals are exceedingly rare. Clearly Intel microarchitecture designers think that, as they seem perfectly willing to continue punishing some applications with a massive performance cliff. Their mitigation should never have been "we'll add a cheat switch for speed" but rather "we'll work as hard as our competitors do to make these cases fast." Standards are supposed to do that, but cheaters abound (and yes I am being a bit perjorative--cheaters don't think of themselves as cheating, they merely have important use cases that demand special dispensation).

GPU hardware is a different, but similar story, from what I can see. It saves transistors to do FTZ, and the originally niche usage of FP to put pixels on the screen didn't really care so much about niggling details. But GPUs became general purpose and important, and they've been dragged into full compliance by application demands. It's the only sane outcome in the end. Instead, all this FTZ stuff has just made a mess at layers above. It would all be unnecessary if subnormals were as fast as AMD, ARM, IBM, and other chip manufacturers have managed to make them.