Yes, privileged partnership is inferior to full membership in the EU, because a country who is a privileged partner does not have the same rights and influence as a country who is a full member. In Turkey's case, this is necessary, because Turkey's economy and human rights are not at such a place where the EU should grant them full membership.
In regards to Turkey's relationship with the EU, a privileged partnership would be preferable for both parties. With such an arrangement both Turkey and EU would be able to reap the economic benefits of increased trade and movement, without the inevitable political conflicts that would come with full union. Economic cooperation makes sense, but Turkey and the rest of EU are simply too different culturally and politically to make a full union sensible.