At some point, pkg is to take over the updates of base, kernel, etc.
That isn't to say that the current freebsd-update isn't any good, just that it needs someone knowing they are doing. And even experienced people do make mistakes. Case in point, you tried to upgrade, you were given a locally-modified file under /etc/ to merge with the new version, you made a small mistake, shouldn't result in losing the system.
If I'm not mistaken, when Debian is confronted with the same problem usually asks whether to keep the old file or replace with the new, which basically narrows the ability to merge the two together in many cases. FreeBSD actually is slightly smarter there, in the sense that it can even detect whether the comment header of the file is the only thing that changes and actually merge it on its own. But, if there are real differences (e.g. you modified /etc/ssh/sshd_config), it asks you to merge the incoming with the current version. In any case, I think FreeBSD is extremely stable when it comes to what goes into /etc and how stable the file formats of individual files there are, so I think it would be perfectly reasonable to just simplify the choices presented to the user.
In my previous job we actually had an exhaustive list of IGNOREd files for freebsd-update, just to make sure that nothing was to get clobbered by some major or even minor upgrade. And that freebsd-update would practically run to completion without any interaction of this sort.