I use it quite frequently myself too.
I have noticed that when I want to add a dashboard tab, I have to remember to not click the button, as it cannot read my mind if I want a dashboard or a worksheet added. If I click it with the intention to add a dashboard, I then have to delete the sheet I added unintentionally, and then go through the right-click context menu to add a dashboard.
So when I want to add a new tab, I have to remember two methods, click nice easy button for new worksheet, but right click and select from menu to add new dashboard (and I have to read every item in the list to ensure I am not deleting a sheet, or selecting some other option that I did not want). (somewhat related, when I go to duplicate a calculated field, I frequently miss-click and attempt to delete the field).
For the life of me, I can't figure why this "create new sheet" option exists in Tableau Reader! Am I missing something? You can't save the packaged workbook with a new tab from Reader, nor can you create a new viz on this new sheet... ???
Oops - good catch, McNike. It shouldn't be there.
Edit: I've filed this as a bug.