And can the Prime Minister still "recommend" the creation of hereditary peerages to the Queen?
Yes, but this hadn't been done since the 80s (Thatcher was the last PM to pull this, even though only a couple of non-royal hereditary peerages were created since the Life Peerage was introduced).
I really don't see it happening.
Neither do I, just wondering if it was still possible. So the PM could recommend that person X be made a Duke or something, and it would be done. Huh. Not going to happen, but interesting all the same. There were those stories about Cameron wanting an Earldom as per the old custom. Again also likely rubbish, but if true, I could see him recommending Major be made one to "re-set the precedent" (at this point, I'm not sure if Blair would turn down one, actually). Murmurs about the Middletons as well, but that would've gone against the point...
Yeah, the mechanisms are all still there but with the direct right of a hereditary peer to sit in the Lords gone, they're not really desirable obviously. Quite amusingly, Harold Macmillan was the last person not a member of the Royal Family to be made a hereditary peer (twenty years after leaving office) long after the process had fallen out of favor to life peerages.
