Exceptions should be used for exceptional conditions. Throwing an exception is basically making the statement, "I can't handle this condition here; can someone higher up on the call stack catch this for me and handle it?"
Returning a value can be preferable, if it is clear that the caller will take that value and do something meaningful with it. This is especially true if throwing an exception has performance implications, i.e. it may occur in a tight loop.
Throwing an exception takes much longer than returning a value (by at least two orders of magnitude).
Exceptions should never be used to implement program logic. In other words, don't throw an exception to get something done; throw an exception to state that it couldn't be done.
I've been through a very similar situation when I had to deal with a terrible legacy Windows Forms code written by developers that clearly didn't know what they were doing.
First of all, you're not overacting. This is bad code. Like you said, the catch block should be about aborting and preparing to stop. It's not time to create objects (specially Panels). I can't even start explaining why this is bad.
That being said...
My first advice is: if it's not broken, don't touch it!
If your job is to maintain the code you have to do your best not to break it. I know it's painful (I've been there) but you have to do your best not to break what is already working.
My second advice is: if you have to add more features, try keeping the existing code structure as much as possible so you don't break the code.
Example: if there's a hideous switch-case statement that you feel could be replaced by proper inheritance, you must be careful and think twice before you decide to start moving things around.
You will definitely find situations where a refactoring is the right approach but beware: refactoring code is more likely to introduce bugs. You have to make that decision from the application owners perspective, not from the developer perspective. So you have to think if the effort (money) necessary to fix the problem is worth a refactoring or not. I've seen many times a developer spending several days fixing something that is not really broken just because he thinks "the code is ugly".
My third advice is: you will get burned if you break the code, it doesn't matter if it's your fault or not.
If you've been hired to give maintenance it doesn't really matter if the application is falling apart because somebody else made bad decisions. From the user perspective it was working before and now you broke it. You broke it!
Joel puts very well in his article explaining several reasons why you should not rewrite legacy code.
http://www.joelonsoftware.com/articles/fog0000000069.html
So you should feel really bad about that kind of code (and you should never write anything like that) but maintaining it is a whole different monster.
About my experience: I had to maintain the code for about 1 year and eventually I was able to rewrite it from scratch but not all at once.
What happened is that the code was so bad that new features were impossible to implement. The existing application had serious performance and usability issues. Eventually I was asked to make a change that would take me 3-4 months (mostly because working with that code took me way more time than usual). I thought I could rewrite that whole piece (including implementing the desired new feature) in about 5-6 months. I brought this proposition to the stakeholders and they agree to rewrite it (luckily for me).
After I rewrote this piece they understood I could deliver much better stuff than what they already had. So I was able to rewrite the entire application.
My approach was to rewrite it piece by piece. First I replaced the entire UI (Windows Forms), then I started to replace the communication layer (Web Service calls) and last I replaced the entire Server implementation (it was a thick client / server kind of application).
A couple years later and this application has turned into a beautiful key tool used by the entire company. I'm 100% sure that would've never been possible had I not rewritten the whole thing.
Even though I was able to do it the important part is that the stakeholders approved it and I was able to convince them it was worth the money. So while you have to maintain the existing application just do your best not to break anything and if you're able to convince the owners about the benefit of rewriting it then try to do it like Jack the Ripper: by pieces.
Best Answer
I don't know the actual reasons why it was done this way, and to a certrain degree I agree that preventing infintely wide exceptions from being thrown would be a good thing.
BUT... when coding small demo apps or proof-of-concepts, I don't want to start designing 10 different exception sub-classes, or spending time trying to decide which is the "best" exception class for the situation. I'd rather just throw
Exception
and pass a string that explains the details. When it's throw-away code, I don't care about these things and if I was forced to care about such things, I'd either create my ownGenericException
class and throw that everywhere, or move to a different tool/language. For some projects, I agree that properly creating relevant Exception subclasses is important, but not all projects require that.