For the IT/comms types who read this blog, I suggest you read Josh Gans on Bitcoin to see commentary on it as money rather than IT.
Bottom line, I think, is that there is a market for a true "virtual currency", but that any private model suffers the same problem as does a private model of a "physical" currency. If you have a precious metal base you need to be convincing that you have enough metal, beyond that you are relying on a Government guarantee.
And I'm trying to figure out who earns the seigniorage - the difference between the value of money and what it costs to make it (recently the Australian Government has run into a problem with negative seigniorage on the 5c coin).
Novae Meridianae Demetae Dexter delenda est