STP template versus Custom Site development

Custom sites	STP files
aspx pages and webparts are upgradeable	upgrade possible only for webparts
manual editing of xml files (onet.xml, schema.xml) more control, more work, e.g. views must in lists must be created in xml.	quicker development (WYSIWYG in SharePoint)
no direct SharePoint designer development	forms can be modified via SPD
one template for all languages	one template for each language
easier deployment – one wsp file for the project is created and deployed automatically with every build	solution must be created manually with postbuild.bat and wspbuilder
actions can be easily added when provisioning custom site	features must be activated manually
Custom lists can be be extended through ECB extensions	connections between webparts can be easily created

Currently known problems with Custom site development
1. Cannot bind RowProvider, RowConsumer and simillar webparts programmatically, it is possible only in UI.
2. Cannot create a custom list based on document library type an error occurs.

One can upgrade from STP to Custom Site definition with SharePoint Solution Generator, but there are some limitations see this.