The buttons will light up regardless. It's not a bug, it's a feature.
If they're not lighting up, it probably means you've locked up. It can come back from that, but if it doesn't after 30 seconds or so, it probably isn't going to.
And I like having the navi pad buttons wake up the phone, so I've left that at default. I think there's an option for it, though. Add a piece to your startup.txt, in the cmdline section,
board-htcraphael-navi.wake=X
X=1 -- Wake up hard keypresses
X=2 -- Wake on volume keys
X=4 -- Wake on detecting a touch on the navipad
These are additive, so 7 would be wake on anything. And I've never actually tested it, so I don't know if that value, even though it's there, actually works. I believe board-htcraphael-navi.wake=0 should make it only wake up on the power (top) button.