I kind of explain it here (mostly in the 3rd paragraph): http://gamrconnect.vgchartz.com/post.php?id=4604627

Basically what it boils down to is that for controllers of this general shape the place your thumbs rest comfortably is about where the control sticks are on the UPro. And for ultimate control in a 3D enviroinment the dual analogue set-up has been proved to work best without getting too complicated (ie technology still isn't quite ready for the Virtual Boy 2) The UPro and Upad are the first controllers to put two control sticks in the thumbs default positions.

The practice of having buttons and a d-pad in the prime position dates back to the NES... that control scheme is designed around 2D gaming that didn't have analogue input. The N64 and the 2nd PS1 controllers (aka the Dual Analog) were attempts to tack on 3D control options onto a controller designed for 2D. Due to the oddity that the N64 controller is, the Dreamcast controller helped prove the control stick should be in the prime thumb position... and XB and GC took that and added it to the need for dual analogue.
Meanwhile the PS controller remains a 2D controller with added sticks... probably mostly because the PS1 sold so well Sony was hesitant to change anything.

As I also mentioned in the linked post... when your thumb is out of the prime position (bending it down towards where the sticks are on a PS controller) it is an easier action to press a button than it is to control a stick... kind of in the same way that it is easier to jump up and down on one foot than it is to balance on it.

I dunno. Using the d-pad for 2d games looks like the controller would feel too small. That's looks like way less space than the SNES controller for example.  

I also really dislike the d-pad being in the secondary position. It's the only thing bothering me about my 360. Everyone says I will get over it.  Even if I could it wont matter because the d-pad is so bad I wouldn't wanna use it to try to control a 2D game anywho.  I was honestly hoping Kinect games were better to spare me from having to use the 360 controller lol. I also didnt like using the DC controller either.

Well I did mention the UPro is finally a controller primarily designed for 3D gaming, Personally for the vast majority of the games I play I would be happy if the d-pad was entirely replaced with 4 normal buttons, some old games do work better with a d-pad over a control stick, mainly 2D platformers that use the d-pad up and down for jumping and crouching. Most modern 2D games though work as well, if not better with a control stick over d-pad... in fact due to the extra buttons on modern controllers the jump/crouch of old 2D games could be moved to other buttons anyway... so the d-pad is redundant.

Unless you have deformed thumbs there are only 2 reasons I can think of that people would prefer d-pad and buttons in the prominent position. One is that you play a lot of 2D games (fighters for example are probably the genre that interests me least of all, but I can imagine a d-pad is wanted for move combos), and the other is that you are doctrinated to the PS controller.

Fighters are one of my favorite genres. I also love platformers too.  I wanna play UMVC3 or SC5 I'm just not sure I would enjoy them on the 360 given my reluctance over the d-pad so far. I prefer 2d games in general.