Question

For a project one can create Milestones and have a particular Milestone (i.e. Release I) have other Milestones as dependencies (i.e. Iteration 1, Iteration 2, Iteration 3).

But when you look at the Project's Schedule the Milestones do not represent any hierarchy or dependency. They are listed in the order of Completion/Official Date. Which is fine I guess as I'd see a list like (ordered by Official Date):

Iteration 1
Iteration 2
Iteration 3
Release I
Iteration 1
Iteration 2
Iteration 3
Release II
...

But then what does specifying dependencies for a Milestone buy me?

Maybe I don't have enough data in this trial for it to be meaningful.

Answer 1

Manual dependencies enable you to have milestone dependencies between projects.

Your scenario assumes only a single project.

Answer 2

You can also use milestone dependencies within a single project to change the order that undated milestones will be worked on (by default, FogBugz assumes you'll work on them in the order you created them, which might not be what you're after).