LinuxMCE has it's warts. It's far from perfect. However, it is getting better every release. It's not just a media center although it does make for a pretty good one even if that's all you use it for. The network centric and seamless storage alone add capabilities that as far as I know don't exist on any other system. If there is some other setup where you can take a new diskless computer, plug it in the network, and a short time later be watching tv, listening to music, watching a movie, controlling your lights, etc. please tell me.
I've had my issues, trust me. I've been to the brink of giving up but with some helpful advice I got over it and warts and all I wouldn't want to switch to anything else. I'm not a programmer so my ability to help the project comes from trying to help others, posting up information when I figure stuff out, etc. Some of the devs here can be a bit harsh at times, but even though I've had my disagreements with them they are all good helpful people. LinuxMCE is a huge complicated project, far more than any single program. There are plenty of things I don't like or feel there could be huge improvements, including your main complaint about the UI. Personally I have no use for touch screen, but it would be nice if there were more UI options, or a much easier way to create a new UI. However, I know enough to realize this isn't a simple easy request. The UI isn't as simple as configuring a new look and adding buttons. UI1 is designed to work on any supported front end device, from TV screens to web pages, to phones, etc. UI2 was designed (as I understand it) to be a gyro happy interface that tries to stay out of the way. To address your concerns:
1. Ease of use creating playlists - as mentioned, this appears to be in the works. It's not great, but it's getting better. I haven't seen the new version so I can't say how much better.
2. Cover art should be able to find at least 90% - If you rip your DVDs via LinuxMCE, it works great. If not you can search via Amazon. Never ripped a music CD via LinuxMCE, my music was previously ripped with other Linux tools, but I suspect it's similar.
3. Touch screen compatabilty with UI2 - If someone really needs a touchpad centric UI, there is a set of video tutorials for creation of a new UI, no programming required.
4. Netlix tie in - I have no interest in Netflix so I've never tried it, but this apparently works: http://wiki.linuxmce.com/index.php/Roku_Netflix_Player
5. It also just needs to work. The claim that no linux knowledge is a bit false to truly run LMCE - this is highly dependent on your hardware. It's also a known limitation and gets better and better with every new release. What I can say is if you have the right hardware, it really does just work. I think the big issue with this is there isn't a good easy to read list or chart of natively (automagically) supported devices. At least with LinuxMCE if a device isn't natively supported you can get it to work.