I don't have a problem with 1/8W resistors, but a lot of people seem to hate them. (or for some reason can't get them)
I only use them when absolutely necessary (and there are a few builds that will probably never be adapted to 1/4W). The biggest problem comes when people use 1/4W resistors on an 1/8W board, and instead of installing them vertically they force them down onto the PCB... Pads get damaged, resistors make contact with each other, etc.
Nothing has been "removed" from the circuit on the new version. Buffered bypass was tapped from the first input stage. That stage is still intact, bypass just doesn't use it anymore... It's still part of the signal path.
BTW I don't have any oscillation problems on the Derailer I have here at any setting.