I would not have thought the precision with using buttons rather than a joystick would improve. They both involve pressing a micro-switch. I'd find it nigh on impossible to play a joystick game by that method.
I wouldn't like the buttons only arrangement, but I think it works very well for some games based on what I found playable using the arrow keys on the PC keyboard.
I found 4 way games like Donkey Kong, Pac Man and Frogger didn't suffer at all from using keys. In fact, I think I did better at Donkey Kong, because I often seem to get hung up trying to climb the ladders, even with my T-Sticks in 4 way mode.
Where I think the button layout would be horrible is in games that use a lot of rapid movements or lots of diagonals. Robotron comes to mind as an example of a game that is a blast with sticks, but that I would hate to play with buttons.