As long as the fingerprint sensor can be turned off at the hardware level, much like location services, I don't really care that it's on the device, but I sure as heck won't be using it. It's not even paranoia about the NSA, it's that I know how easy fingerprint sensors are to fool. Your phone is much more secure using a password.
A password is digital, 1s and 0s, a pass-fail condition. Either you enter your password or you don't. A fingerprint is analog, and the sensor can only determine with a certain degree of certainty if it's your finger, somebody else's finger, a picture of your finger, or any number of things. So the software creates a probability, instead of pass-fail, and the software decides if the finger (or whatever) it's seeing is "close enough". It's only a matter of time before somebody figures out what Apple thinks is "close enough" and is able to bypass your lock screen without your finger. The more strict the software, the less usable the sensor and the more frustrating it is for the user, so to be sure, Apple's software won't be terribly strict.
Let's not forget, you're using your iPhone with your fingers all the time. It won't be difficult for somebody to get your print off of the iPhone, and use it with a fake finger of some kind to unlock your device. A fingerprint sensor makes your iPhone secure in the same way the password system makes your iPhone secure if you engrave your password on the back of your iPhone. I'll also point out, you can't give up your password when you're unconscious, but you can give up your fingerprint.
And sure, what the heck, if it's not the NSA grabbing your fingerprints right off the sensor, it's going to be somebody else. If Apple's software can get the fingerprint sensor to activate and take a reading, somebody else's software can to. Perhaps criminals, perhaps well-meaning but ignorant software developers who themselves may get hacked. Even if your fingerprint isn't terribly valuable today, plenty of people think it'll be valuable in a few years as biometrics of all kinds are used for financial transactions or whatever else.
A password is simply better. It's digital, so the software isn't making a probability-based decision to let somebody in, and it's hidden away in your head, instead of left behind on everything you touch hundreds of times a day.
If you have stuff on your iPhone that people find important enough to go through the trouble of faking your fingerprint, you probably shouldn't be using a cell phone at all.
Not to mention it will require a code to turn OFF the fingerprint lock or wipe the phone. So it's not like a thief can knock you out, take your phone, unlock it with your finger, and then be free to do whatever with the phone.