The advantages of using it are so strong that it feels more like a built-in god mode rather than an alternative interface functionality (or whatever one might call that).
The best and and most functional compromise between real time and turn-based I've seen, is the real time with pause approach (which is kind of similar to the VATS, but without taking away any of the risk). But for it to work properly, it is required that the player will have a bit less control over the character - as in a less action oriented approach, were the player simply instructs the character which bad guy to shoot and the character takes care of the rest, without the need for more precise aiming by the player for example. However I don't expect that such an approach would be too popular with the average Bethesda fun and neither would I require it from Bethesda, since part of their strength lies in the inclusion of heavy action elements in their games.
As such I am more in favor of getting rid of VATS and the inclusion of a proper bullet-time feature instead (which could be still 'powered' by action points... why not?)
People should stop trying to look for proofs that Bethesda's games are RPGs. It's a practice that gives birth to gutless features such as VATS. I hope more for a game that will play properly as a good FPS, without lazy and distracting compromises, while having all the depth and complexity of a proper RPG under the surface - a solid action/RPG... not an awkward average FPS + average RPG combination. --- In other words, when the RPG approach doesn't work well, get rid of it, use the action approach instead. If we end up with no RPG elements in the game's combat, too bad, make all the action elements work properly though, and I for one will not complain.