I play using a controller for these games, and I must say that it svcks being required to pause the battle just to pop a potion or to change my off-hand weapon to a light spell. Of course, I don't exactly use a 360 controller, even if it registers as one, so I have no issue hitting the diagonals properly.
Thankfully for me, since I am on the PC, I have the advantage of mods that give me a full 7 hotkeys.

Honestly, I don't understand the big deal with pausing the game. The longest I've been in the favorites menu is about five seconds, and I was looking over ALL of my 10+ shouts in that time, deciding which I should kick the crap out of a cave bear (which I can mutilate) with.
Sure, maybe I spent a few moments looking over my favorites menu when I was a noob, but now I never spend more than half a second, and that's all scrolling.
This system, in my opinion, is FAR superior to Oblivion's, in that we have more slots for quick-access, and it's easier to get the hang of. Selecting spells in Oblivion, at least for me, was f***ing terrible, because I had to re-memorize every damned keybind every three levels. Not to mention how damn crowded my spell-book got.