The user and item side information should be ignored in the popularity model. However, there was a bug in version 1.2 that has the potential to cause the behavior you're seeing, and we've since released a bugfix version, 1.2.1, that fixes it. If you are using 1.2, hopefully this update will help -- just do "pip install --update graphlab-create".
As for the documentation of the popularity recommender, not explicitly stating that side data is ignored is an oversight on our part -- thank you for pointing it out, and we'll clarify that in the documentation.
Finally, thank you for your thoughts about further enhancements to the recommender. We'll consider those. Right now, for users with no previous ratings, the other models do recommend something very similar to what the popularity based recommender would, so it should handle those cases seamlessly. However, we'll definitely consider your suggestions as additional enhancements.
Thanks, and happy new year as well!