Ahh, I've been busy so I haven't been able to keep up with this thread!
Anyway, a friend of mine came over last night with their Japanese copy of Fire Emblem If/Fates (coincidentally, it's the very same person who posted the
videos that people are sharing in this thread) so that I could try it out for myself. I've watched them play it before, but I hadn't actually played it myself yet. It didn't really change my opinion of the feature much (but I already had a pretty good understanding of it prior, anyway), but my friend did mention some things that I hadn't even considered.
My friend has played through both Birthright and Conquest (and part of Revelation), and they've said that interestingly, they've gotten to know many characters entirely through this touching feature, and without it they'd know most of the characters far less. Why? Because while they may not pair up with or use all of their characters in battle, they can invite any character to their home and play this mode with them.
Every character has their own mannerisms and reactions based on their personality and relation to your avatar characterfor example, your husband/wife is going to obviously be more intimate with you than other characters. You can use the feature with your children, and it becomes more of a motherly/fatherly type of thing. Other characters that you're not married to can still show affection, but it's not the same type of affection that's shown with your husband/wife. Characters can even show resistance and refuse to be touched. (And for those unaware, the touching is also limited to just the head and shoulders; it's not like you're touching all over their body.) It's a great way to form deeper connections with these characters and get to know them better, or at all if you're not even using them in battle.
I personally don't find anything "creepy" (a term that's misused and thrown around far too much) about it at all, though I understand that it's common for others to think that way about stuff like this, but I'm sure most of the people complaining about it haven't played it themselves or even watched more than a few seconds of it on YouTube, so they probably don't have an accurate understanding of what it is. Even so, it's an entirely optional feature that both affects gameplay (giving you stat bonuses with characters outside of battle) and enjoyment (getting to know your characters better and, for some people, giving more options for connecting with same-sex characters), and to want it gone just because you don't like it is rather ignorant and mean-spirited, in my opinion.
Whether or not its removal will make the game "better" is entirely subjective. Ultimately, it's removing optional content that plenty of people were really looking forward to, and that's not a good thing in my book. It's not like it's just altering something slightly like many other localization/censorship changes, this is entirely scrapping a feature that can add a lot to the game for many people.