you'll have to deal with OS warnings and prompts every time you want to edit it.

For which versions of Windows does this happen? I'm running Windows XP and I also use my hosts file to block time-wasting websites, but I don't ever get any warnings when I edit my hosts file in Notepad. This makes the hosts file not so inconvenient, because all you have to do is (Windows key) + R > type in "cmd" and hit enter, and in command line type: "edit c:\windows\system32\drivers\etc\hosts" and you're done.

This can be done in about 15 seconds, unfortunately, and having the line "#127.0.0.1 www.facebook.com" in my current hosts file is a testament to that fact ("#" comments everything out after it on that line).