Ok, so if this is possible, why do we need to install so many ground stations? Obviously, this is good for 1090 only, but it would seem to be the "magic bullet" for global coverage at a (somewhat) reasonable price.
What's the downside I am missing? Is it not practical to use satellites to track traffic in high-density areas?
Satcom is in very widespread use, but it's not cheap. In general, airline equipment defers to cheaper ground based network service providers for ACARS support when it can establish a decent link, before cutting over to a satellite service providers.
1090ES ADS-B pumps out position (along with possibly 200 other pieces of data) at a pseudo randomized interval generally less than 1/2 sec.
There is a huge quantity of data continuously pumped out of airliners via ACARS. ACARS with ground and satellite network coverage routinely provides position updates about every 15 minutes. Depending on the installation. That's not sufficient for ATC to provide separation service, so they may use oceanic rules (50-80 nm).
I help support some of the equipment, but don't know all the uses.
There are 100s of data transmissions, some from the crew, some automated like engine performance monitoring (fuel, temps, vibrations), event triggered transmissions like annunciations, accelerometer exceedences (abnormal G loads) etc.
Aircraft health monitoring is to the point on modern jets (if you pay for the service) where you can log into a provider and request that the system generate an email to you to let you know if the #2 engine oil temp on a specific airplane has exceeded a certain value while it's en route.
None of that is free though. ACARS used to charge by the byte. Everything is transmitted, received, stored in a huge data warehouses where it can be retrieved by ICAO address and flight leg. It's a huge expensive business, with a lot of logistics involved.
Not to digress, but the only reason MH370 is missing is because the airline didn't write the check for services and equipment that would have allowed tracking. It's not mandatory.