I don't feel virtual sticks are 'best', but it can be a compromise. Some types of games just respond better with a couple of axes and buttons than to any kind of tap, tilt, or swipe, platformers in particular.
It's also difficult to be 'first.' Even if your controls were intuitively designed, sticks and pads are our default inputs. If the game looks similar to anything they've played before, you're fighting against that acclimatization. With Windows 8, the majority of complaints are along the lines of "this is drastically different" and that's made it difficult for people to adapt.
If people are holding the device incorrectly, you could try drawing more attention to the controls when they first start up, get them to change the way they think about the game. Focus the first minute on the optimal way to play and throw in some messages suggesting on how to hold it. If there's a lot of different gestures or actions, don't overwhelm them all at once, get them to use them one at a time.
It sounds like if you can break them out of the virtual-stick mentality before they get the expectation that it's the way to play, they might have a better experience.