What can Menus do that Taxonomy cannot?
Basic difference I run into some time ago: a menu can link to only one content where taxonomy term can refer to several nodes. So, if you need a relationship node -> term that allows one node to be marked with many terms (and, in consequence, have one term assigned to many nodes) then menus won't do that for you (at least not out of the box). Node -> menu relationship is more 1-to-1 where node -> term is 1-to-many.