Why do HD seeds use a word list? I'm curious what the purpose behind having a word list for BIP39 HD wallets? 

Are you required to use these words to create a wallet seed? 

What would happen if you chose random words not on the list, or instead a long continuous string?
The bip39 algorithm is badly designed and that is why it is dependent on a specific wordlists. Each time you want to add a new language you have to update the BIP! 

Electrum has it's own seed mnemonic format that does not depend on specific wordlists so it's definitely possible to create a format like that.