Okay, so I've been testing some stuff after reading this thread and here is my personal decision on what is best: I feel that the extra bit of momentum conservation with using c-stick set to attack/tilt is not worth the extra finickiness that the setting gives. Even if you flick the c-stick as fast as possible some momentum can possibly be lost, but I don't feel like its enough of a loss to gain back along with the finickiness.
Here's the rundown: if you give any cardinal input that is exactly between two different attacks (uair and upper-right nair), the game will flip-flop on which attack comes out. This means that you have to be much more precise with your c-stick inputs, unnecessarily so imo. Because if you are not exactly giving an input in one of the 8 cardinal directions, you run the risk of throwing out a move that you didn't intend.
Comparing this to the default controls...the game seems to only do this flip-flop when you give an input that is exactly on the diagonal meaning there is significantly more leeway.
You could argue that the former control scheme is superior with practice (or if you're a robot), but I see it as more possible inputs (I don't mean instances of input from being bad) that will give you a random outcome. That's not something that I want. It's kind of like adding another button to the controller that will do a random move if you press it. Or if you were to divide the GC controller A button into two halves and one half will randomly do a special or attack move. But because of that randomness, it's a button you never want to press but you have to deal with it on the controller.
Also, another bug about the c-stick: regardless of the control scheme (tilt or smash c-stick), a diagonal input will sometimes cause you to move forward in the air if you jump straight up and throw out the diagonal c-stick attack, albeit this happens quite rarely.
Also also, some people mentioned a nair being thrown out using the c-stick with the default control scheme. That has happened to me before as well.