Until recently I used to play almost exclusively with fingers - thumb, forefinger, middle and ring finger. It's a really underrated way of playing. I feel I've got so much more control and I'm much more in contact with the guitar this way, and, hey, if it's good enough for Jeff Beck...
However, I've been trying to train myself to use a pick - doing okay with rhythm playing, but lead is so difficult!
What I'm a bit worried about is RSI. There's a school of thought that reckons picking from the elbow can put unnecessary strain on your arm muscles, but I'm not sure anyone's ever proved this. Given that I've got quite a lot of right arm shoulder pain at the moment (more from laptop use, I think, than guitar playing), I'd be interested in anyone else's experience...