This is the third posting about making the correct design decisions when implementing SharePoint. It's about site definition vs site templates.
- Better overall performance of using site definitions instead of site templates for creating sites
- More control and flexibility in building a specific solution. One thing to keep in mind though is to keep your custom site definitions as minimal as possible and to use the SharePoint Features framework to add functionality.
- Site templates are basically black boxes where you have limited control over the way that they are working - so when you get into trouble you're stuck.
- It is easier to add additional functionality to site which are developed using a site definition in contrast with these built using a site template.
The main reason for choosing site templates is that overall it takes less effort to create a site template. You can just click everything together and use the Save site as template option. Another reason would be that you can change a site template without affecting existing sites (allthough this might be a disadvantage as well).
Some extra info: Site definitions versus site templates and deciding on the correct customization approach . On a similar note this same post from Eric - The great debate: SharePoint Designer vs custom site definitions.