It's hard for me to think of an area of algebra that applied model theorists haven't touched recently. I have not heard of any logicians working on Iwasawa theory, but it wouldn't surprise me if there are some.
Diophantine geometry: here is a survey article by Thomas Scanlon on applications of model theory to geometry, including discussions of Mordell-Lang and the postivie-characteristic Manin-Mumford conjecture.
Number fields: Bjorn Poonen has shown that there is a first-order sentence in the language of rings which is true in all finitely-generated fields of characteristic 0 but false in all fields of positive characteristic. It was conjectured by Pop that any two nonisomorphic finitely-generated fields have different first-order theories.
Polynomial dynamics: see here for a recent preprint by Scanlon and Alice Medvedev. It turns out that first-order theories of algebraically closed difference fields where the automorphism is "generic" are quite nice.
Differential algebra: By some abstract model-theoretic nonsense ("uniqueness of prime models in omega-stable theories"), it follows that any differential field has a "differential closure" (in analogy to algebraic closure) which is unique up to isomorphism over the base field. There are much more advanced applications, e.g. here.
Geometric group theory: Zlil Sela has recently shown that any two finitely-generated nonabelian free groups are elementarily equivalent (i.e. they have the same first-order theory). According to the wikipedia article, this work is related to his solution of the isomorphism problem for torsion-free hyperbolic groups, but I don't understand this enough to say whether this counts as an "application" of model theory.
Exponential fields: Boris Zilber has suggested a model-theoretic approach to attacking Schanuel's Conjecture. His conjecture that the complex numbers form a "pseudo-exponential field" is actually a strengthening of Schanuel's Conjecture, but the picture that it suggests is appealing. See here for more.
This is in addition to the work on Tannakian formalism, valued fields, and motivic integration that have already been mentioned in other answers, and I haven't even gotten to all the work by the model theorists studying o-minimality. This was just a pseudo-random list I've come up with spontaneously, and no offense is meant to the areas of applied model theory that I've left off of here!
The class of simple groups isn't elementary. To see this, first note that if it were, then an ultraproduct of simple groups would be simple. But an ultraproduct of the finite alternating groups is clearly not simple. (An $n$-cycle cannot be expressed as a product of less than $n/3$ conjugates of $(1 2 3)$ and so an ultraproduct of $n$-cycyles doesn't lie in the normal closure of the ultraproduct of $(1 2 3)$. )
It turns out that an ultraproduct $\prod_{\mathcal{U}} Alt(n)$ has a unique maximal proper normal subgroup and the corresponding quotient $G$ is an uncountable simple group. This group $G$ has the property that a countable group $H$ is sofic if and only if $H$ embeds into $G$. For this reason, $G$ is said to be a universal sofic group.
As for your third question, Shelah has constructed a group $G$ of cardinality $\omega_{1}$ which has no uncountable proper subgroups. Clearly $Z(G)$ is countable. Consider $H = G/Z(G)$. Then $H$ also has no uncountable proper subgroups.Furthermore, every nontrivial conjugacy class of $H$ is uncountable and it follows that $H$ is simple.
Best Answer
Well Steinitz's theorem on the existence of an algebraic closure for any field can be proved through an easy application of the compactness theorem for first order logic. Of course the "usual proof" is not so complicated but it requires a bit of attention, whereas with compactness it's obvious. I hope this is the kind of example you were looking for.