I don't have a problem with a home button as such, I just don't like the current design. It's old, it's dated and it spoils the looks of the gorgeous iPhone 5 IMHO.
I wouldn't mind something like the home button on the S4 - wider, slimer and flush with the surface of the device. I would prefer a capacitive home button if they could do it right as like you I've had problems with them in the past.
I was just reading how Apple have a tap to select patent so that would seem a good option. A flush sapphire chrystal "button" that you tap rather than press but has the same affect. As long as it not big and round I would be happy with that.