With the hammer, you have to whack each building in turn.
With either of the flamethrowers, you burn them, the engineer behind them, the other building behind the engineer, and anyone else trying to get close. And you get all your ammo back when the buildings go kablooie.
So... it doesn't quite make sense to pick over the flamethrower. [Edit] Er, and by pick, I mean use -- it replaces the melee, not the flamethrower.
On the other hand, who doesn't want to take a sentry nest apart bit by bit with a BANHAMMER and your BARE HANDS. That's like liquid awesome.
Iunno, unless the engineer update brings fireproof or fire-resistant buildings, I don't see it as a serious weapon choice. A fun one, most certainly (and I'm going to beat a heavy to death with this once I get it, I guarantee it). And fun is what it's all about, so thumbs up to Valve for this update.
Kep