I would certainly guess that the OS gets pre-emptive access to it in much the same way as it can trap system key interrupts before they go to applications, but I'm still wary until there's a lot more information available on this. Another case is what if the app decides to replace the ESC key altogether? If that's prohibited somehow then what's the advantage of removing the physical key?

TBH, a separate OS sounds like one more thing to go wrong, which is also worse, not reassuring. I'm also not keen on the idea of someone remotely rooting my touch bar - also not a problem I currently have to worry about.

Just read the Ars review - it looks like the bar is divided into three, with only the middle area fully under app control (the left hand area showing dialogue box controls or escape). It does say that the bar slows down under heavy load though.

Hm, so what happens when an application locks up with a dialog open? Sounds like you may need to CMD+TAB first to get the ESC key back, which is at best going to be a nuisance (and I'm not sure exactly which OSX shortcuts are non-maskable in the way that CTRL+ALT+DEL is in Windows).

Sure, but there is a whole separate piece of newish software (watchOS? touchBarOS?) that Apple will no doubt develop, enhance and update regularly. It is perfectly capable of having its own crashes and issues.