I'm with you that the F-35 cuts bother me to as we desperately need mass.
However, I think your Red Flag example is off, it would be similar to saying that because it'd be hard to find a use case for the F-4 in a modern Red Flag, that we should just scrap the fighter force. The problem is the E-3 is an old bird and should have been sent to the boneyard 15 years ago and we should have gotten the E-10 or E-7.
Unfortunately as far as C2 platforms go, the JSTARS was actually the most advanced platform we had but buying them second (or fourth) hand led them to an early grave with no capability to replace it. Personally as an ABM, I believe if we cancel the E-7 the Air Force should blow up the C2 enterprise as it's evident no one wants to pay for it (not saying get rid of it, but we don't seem to want any Tac C2, but we also don't want to staff the AOCs).