I saw a question asking how to write recommendation letters and I wonder why this is so important? Why are recommendation letters crucial for scholarship applications for studying in Masters or research ? They should be more interested in the student willing to work hard and be loyal to the studies, not cheat, or plagarise or use unfair means to win. What will a recommendation do instead?
Your question seems to present the use of letters of recommendation as being orthogonal to the goals of selecting hard-working and dedicated students. This is simply a false assumption.
The purpose of letters of recommendation is to ensure the person making the selections that they are choosing qualified candidates who will satisfy the needs of the program. Anybody can claim to be hard-working, but how do you know this is actually the case? If you have several people, well-versed in the needs of research or advanced study in a given topic, telling you that candidate X has all the prerequisites and character traits needed to ensure success, you're a lot more likely to believe it than just to take someone's word about himself or herself.
"They should be [more] interested in the student willing to work hard and be loyal to the studies, not cheat, or plagiarize or use unfair means to win."
True enough. But letters of recommendation are the best way to "find out."
Grades and test scores certainly count, but they do not "testify" to a student's ethics or his/her ability to "game" the system. Only human beings know what was really behind someone's record. The way to get that kind of information is to have students submit letters of recommendation.
What people don't say is often has important as what people say. In a litigious American society, not everyone will point out someone's negatives. But a letter to the effect of "s/he did okay in my class as far as I remember" is not exactly a ringing endorsement but rather a red flag, especially if that person has a high grade.
The classic example of "damning with faint praise" was cited by my father, a retired professor. "If you knew him as well as we do, you would appreciate him as much."