One word for SE failures - custom ROMs! I bought the Xperia X10 because AT&T was selling them for a penny. Hard to go wrong for a penny. The first thing I did was debrand it and update to 2.1. Still too junky, so I headed over to XDA-Developers and "fixed" it. Problem solved. And SE has mended its ways and will be offering Gingerbread for the X10.
The ARC looks like a nice machine, all told. Timescape actually almost looks usable. I don't think the idea behind TS was bad - just its laggy implementation and of course, if you don't want it, Root Manager to the rescue!
Of course, your average user isn't going to do any of that stuff, but the Arc's stock experience looks be be far superior to the OOBE of the X10. That said, I still don't see anything particularly compelling against the competition. I find that HTC's Sense UI is far better than SE's UE UI and I'm actually using SPB's 3D Shell on my X10 which I image would be just as great on the Arc.
XBox 360 S, 16GB iPhone 4S, iPod Classic 160 GB, Dell Inspiron Mini 1018; Macs: Mac Mini 2.4 GHz 6 GB RAM; Macbook 2.0 GHz 3 GB RAM; MacBook Air 11", 24" Cinema Display