Capacitive buttons are a great thing. Much better than physical buttons. Last much, much longer and look better.
That would be subjective. I actually liked the physical buttons on the Xperia Arc more than the capacitive buttons on other phones. Never had a case of wrong button press. Nowadays i am watching something and poof, it is gone because i pressed back button or i am staring at an annoying menu because of menu button. After a while it gets annoying.
On screen buttons are further from the bezel though and i would like it if more OEMs included on screen buttons instead of separate capacitive set.