I just set it all up first, slide it in the armband and go. I have some Skullcandy earbuds for the iphone with a mic and if I want a different song, I just click the button twice. I can control the iPhone through the plastic sheet and usually will at the end of the workout to just hit the end workout button.
As for the liquid indicator, my armband seems to keep it dry, but I am only running for 30mins right now. On longer runs, it might be an issue. I do have the squaretrade warranty though, so I'm not too concerned about it.