I had a 5S which has the first generation touch ID paired with a physical button, which I considered to be the best home button on any iPhone I'd owned. I've since switched to the 7 plus and now think the haptic/solid state button is superior. Having the whole bottom of the phone simulate a click feels really satisfying, and knowing that no physical hinge is involved gives me confidence that the effect won't deteriorate with time or use.

Just as moving from a physical keyboard to touchscreen reduces moving parts and therefore many points of failure, moving to a solid state home button eliminates a very common and critical point of failure.

to me, clicking the haptic button feels like the entire bottom of the phone clicks, which confuses me when i click next to the button.

So the main drawback is you are not getting a realistic click.