This may be an unpopular opinion, but what they're doing with EBR and Felicty, is the same thing they're doing with Malcolm/Barrowman, and the show is hurting for it. They are big fans of his, and that's why they keep him around, as opposed to having stories that actually work for the character.
I remember an interview with Barrowman where he said that the writers wanted him to be the Joker of this universe, and to be a recurring threat, as Merlyn is GA's archenemy in the comics. It is true that they are fans of him, but they also want to have him as his as the shows main villain, like Merlyn is in the comics. And they have succeeded in that regard IMO, as he is this universe's Joker. There are more powerful and dangerous villains that operate on a larger scale than Merlyn (same case with the Joker), such as Slade, Ra's and DD, but nobody has caused as much damage to the hero than Merlyn has (again, it is the same with the Joker in regards to Batman).
He caused great damage to the city and lots of people died from his Undertaking (around 500), he killed the heroes best friend Tommy (which was also a loss to him too, but it seems to have affected Oliver more), he set about the events that resulted in Oliver's Dad's death, him being trapped on the island for several years (and as a result, his feud with Slade which also resulted in more death and Oliver losing his company), he used Thea, which resulted in Sara's death (a big loss to both Oliver and Laurel) to set up the feud between Oliver and Ra's, leading to Thea's death and her having to be brought back with side-effects, Roy having to fake his death, give up his life and go on the run and Oliver having to lose his teams trust in order to beat Ra's. He has also revealed William's existence to DD, resulting in William having to leave Oliver's life and the love of his life Felicity breaking up with him.
He will probably cause more damage before the seasons end, as he has aligned himself with H.I.V.E. Slade, Ra's and DD are more powerful and have greater resources, but failed to use their resources to hurt and cause as much pain for Oliver as Malcolm has. It is similar with the Joker. There are more
powerful villains than him, but no one is as persistent or has caused as much damage to Batman as the Joker has (Barbara Gordon, Jason Todd, Rachel Dawes etc).
At the end of the day though, the most important thing is entertainment, and whether they have used Malcolm in an entertaining and interesting manner is a different story (I take it that you do not think that they have done so). I am just giving my impression of what I think they have been going for with Malcolm (based on my observations and what Barrrowman said). While they are fans of Barrowman, I do not believe it is the only reason that they have kept him around. They want this shows most main and most persistent threat to be the same one from the comics.