I've lived on Capital Hill myself, and my fiance still lives there. Right by Swedish. Can't say I've ever had any trouble with the transit system there myself, but I will admit that I've never had to commute there during rush hour traffic.
Seattle remains the only city that I will travel to (and I do every few weeks) and be perfectly happy not renting a car in. While I have done numerous transit studies, I've never done one in Seattle. But, from a personal perspective, I find it to be very intuitive and useful.
I admit that the outlying areas are probably lacking. The mountains make most anything except buses difficult to implement, and the Sounder isn't very popular. I was dissapointed to see the hare-brained monorail idea has taken off for some reason -- money that would be much better spent elsewhere I think.