Those of you who can't seem to get used to it, switch to the lowest "1" setting rather than the default "2" setting. It feels more natural like a physical home button. The default "2" is actually too strong IMO and hence unnatural.
It is ok but try using it one handed now, just holding bottom of iPhone. It's almost impossible now since the actual button does not move.
I also find it annoying how much I feel it move now for just pressing a fake button. Turning that option off helped.
I have to give Apple credit, after the preorder debacle for IUP users they did their best to make things right and I was able to reserve a black 128 gb iPhone 7. Aside from the switch from a Plus to a regular model, which I think was the right decision, I'm most impressed with the new home button. It feels way more responsive and reactive, and with the Taptic setting on 1 it still feels likes real button (on 2 or 3 the feedback is too much).
I've seen a lot of people slagging on the new home button but I'll bet there are others out there like me who think it's a clear improvement over the old mechanical button. If you're feeling the same way, speak up here!