I'm working on a new to-do list application, and yes I do think the world needs "yet another" one. Are all the Twitter clients out there perfect? Is there one that fits your exact workflow, has all the features you want, and no bugs? If not there is space to innovate. Yes, the market is saturated but if you have a new idea, I say go for it. Even if your "perfect" new Twitter client is only perfect for you, hey, you now have a perfect Twitter client. Odds are, it's perfect for someone else too.
The blog is aimed at people writing commercial software. If you aren't trying to make any money, then it might not apply. But if you are going to put all that time and effort into something, wouldn't it but good to write something that has a reasonable shot at having lots of users?
1. Could you point out to a few such niches where there is "real need for software, but limited competition".
2. How does one go about finding such niches?