Answers:
Will the proximity sensor work?
It depends, there are companies who know how to fix it and there are companies who do not. I have the five star shaped screws and in most cases with these screws, the proximity usually never works. Mine on the other hand works flawlessly so once again do your research and see which company can resolve that issue.
Will the earpiece work?
Im not even sure why people are heaving earpiece problems, i was watching the whole process of my iPhone being converted (Asking questions, being nosy, and annoying) and there nothing to do with the ear speaker being connected, removed, or disconnected. I do see something that might be a problem, the new speaker mesh i have in my white kit has glue on it so it might clog it up later on with dust.
Are these faulty in all white conversions?
You need to do your research and you have to really go into detail with each of these companies. If i was you, i would not trust anything below $200 unless its a kit.
How bad is the camera really?
I think over the time that i have been on these forums, i have heard so many issues with the camera and primarily because people forget to remove a film on the back or on the camera lens it self. Camera should not be an issue unless you're missing the flash diffuser, if you miss that then most likely you will have white bleed through. The only way a part can be missing a diffuser is if its really cheap quality.
Hope this helps