I played a generic caster amidst a group of phb classes. He wasn't any more or less powerfult than anyone else. It did allow me to tailor the character to the "vision" I had of him though. We played from 4th to 9th in WLD before a TPK, but everything seemed ok.
As for "no one would play an arcane caster". It comes down to what you want your primary stat to be. If you want to have a high intellegence then it's good to make your character an arcane caster with Int as your casting stat. So, in short. For Min/Max'rs it's a gift, they can create the fireball weilding full plate armored caster. But for everyone else why wants to use it to create their character concept without having to resort to complex multiclassing it's great. You don't have to be 10th level before you concept comes to fruitition.