I think the reason flywheel power is still preferred most of the time is that car manufacturers have always had a habit of announcing flywheel power on their specs for their cars. So it's easier to compare power outputs and everyone has kinda "calibrated" their brains for the flywheel output so it's easier to understand what is lots and what's not.

I agree that it would be much more logical to talk about power on the driven wheels, but I still prefer using flywheel power because it just seems to be the way around.