Well you've already spotted one of the biggest problems with live automation: latency. Even if your system is running great with a latency of 50ms or less, that's still not *realtime*. If you've got a consumer grade soundcard, then your latency is problem closer to 250ms, in which case trying to do automation in realtime is pointless.
Also, moving faders with the mouse is not optimal because, as you said, making small adjustments is a royal pain in the ass. Using the keyboard can help with smaller adjustments, but it's too damn slow.
Personally, I prefer drawing automation even if it is a bit slower. You can draw while playing back so at least it's interactive.
I've always wondered, though, what it would be like to work with one of those MIDI controllers with faders that allow you to interface with software much like you would hardware. With a low enough latency number, it *seems* like it would be pretty sweet. I hear n-Track supports this, but I don't have the hardware.
Does effect automation work for you? I'm not talking about send to aux shit, but the actual automation of effects parameters? I tried it with the original 3.0 release and it was buggy as all hell. I could get it to move certain effect parameters, but the interface would get all weird and it started locking up like crazy. Typical of new n-Track features I guess.
Slackmaster 2000