I agree with all the replies posted here.

We developed a custom product using elgg. We didn't modify core, we made our own plugin customizations, because we can easily upgrade to the latest version of elgg. It is far more easy to build custom plugins rather than maintain a whole elgg fork.

However, you can use elgg in any way you want.

There is one very good reason to fork elgg: the core developers are racing ahead, insert debilitating code  and plugin functionality quickly becomes difficult and time consuming to maintain. Plugin developers simply give up after a while. Maintaining your own fork is much easier. It doesn't help when web hosts offering elgg hosting stop providing support (e,g my experience of one formerly award winning host is that their support became by ticket only and response times are around 6 months+ after they were taken over by EIG).

the core developers are racing ahead, insert debilitating code 

Care to explain that?

Maintaining your own fork is much easier.

How so? It is not. So much to take care of for just one person.

web hosts offering elgg hosting stop providing support

I don't think so, web hosts fully support version 2.1, and well, they even support 1.7 (not recommended though)

This is an elgg test site built with version 2.1

http://labs.milocker.com/

And here's another one built with elgg:

http://academy.swsocialweb.com/

(It is PiGo LMS, and this deployment has 99 active students)