This question has been asked many times before on this forum. Why not do a Search? I've never found that allowing a basil plant to flower has affected the flavour in any way. However, by regular pruning, you will encourage the plant to produce more leaves, and to become more bushy, and less woody and spindly. You can pinch out the flowers if you want, but for myself - it's out with the hedge-trimmers! Or else I'd spend my entire life-time pinching out flowers! Mine flower from a tiny seedling, and never stop! Basil can become quite a large plant, you know! As for using it. As the poet said 'let me count the ways'.... Basil goes well in/with: Italian, Mediterranean and Thai cuisines, especially pasta, meats, beans, tomatoes, eggplant, zucchini, and onions, poultry, soups, eggs. Use with mackerel or shellfish, add chopped leaves of several varieties to salads. Good in soups and fish cocktails with crab and prawns. Goes well with veal, lamb, duck, and game. I suggest you freeze basil, rather than drying it. It will hold its flavour better. You can freeze whole leaves, or chop them and freeze them in flat 'pancakes' - easy to break off what you need, rather than having to get out hammer and chisel to a lump! A good way of using up basil is to make Pesto. Pesto can be used in a heap of ways. http://www.google.com.au/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&q=ways+to+use+pesto&meta=&btnG=Google+Search Here is a link that might be useful: basil recipes

Perhaps cutworms?

It can come back, cut it back to about 4-5 in tall and it should sprout new growth. Once it starts growing again you can give it a diluted tomato fertilizer. If anything it probably got a draft and too much water. Basils are not fond of rain too much, they need a lot of light and clouds & shade will make them drop leaves every time.

I agree that ALL big box store plants should be repotted immediately. Their soil is only designed to make them lighter for shipping. Having worked in commercial greenhouses, I know they are pushed way too fast with strong fertilizers to get them ready for market in a short time. They take awhile to adjust to a good potting soil and normal care, meaning they may just "sit" for awhile, especially if they are outgrowing a growth retardant (poinsettias are sprayed heavily with this). Most herbs are easy to grow from seed, so I do suggest that.