Grenades DO work, they just don't work the way they used to.
I tried throwing a few in the Storage Tower; if it blows at or closer than 1 square out of your vision in the Storage Tower, the grenade will do damage. Otherwise it will do absolutely no damage even if you weren't aiming farther than that, which is ridiculous. Again, if this is a feature I suggest that there be some way you can know the limit on throwing ability; I think what would be best would be a limit on where you can move your cursor while aiming the grenade and a note popping up when you try to move past it saying "You can't throw that far!" Then, if the grenade does go farther than it normally would, it won't matter that it blows up as normal because it only happened due to player inaccuracy (which could just as easily make it undershoot the target, so no real bonus in the long run).
What would be a good improvement, though, would be to make it so that you can at least throw a *little* farther (2 or 3 tiles shouldn't break things), so that you're not practically committing suicide every time you want to throw a grenade.
EDIT: A hunter spawning in LOS, eh? Must be Kornel's attempt to get the whole 'aliens coming in through the air ducts' idea going, only right now it doesn't make sure to check the random location where the alien spawns isn't in your LOS. I had something similar happen, but instead of it popping up in my LOS it popped up in a room where I'd been before and shut the doors. This does give me an idea, though...