Clearly, the true believers of BTC see it as an end-run around all other currency in which we stop trading in dollars or euros and do our transactions in a torrent economy.

The more I've looked at it, the more I believe it will occupy a middle ground for some time to come. As long as the exchanges are more competitive than PayPal, bitcoin has a lot to offer as simply a ledger for online transactions. Coinbase + the bitcoin network looks a lot more attractive than PayPal alone. I see bitcoin eating PayPal within a few years (which might include PayPal becoming a bitcoin wallet). It will also eat Square, then Visa and Mastercard. Only after all of that, do I think bitcoin can start to supplant fiat currencies; and if that happens, it will be mostly because people will no longer recognize the difference between the two.

The speculative bitcoin market is about as rationale as any other bubble market, and I think that Krugman is right to criticize it. However, I would think a Keynesian could recognize that it might not be a matter of bitcoins as units, but the nature of the network. Perhaps he simple sees the innate limited resource aspect of bitcoin and thus throws out the baby and the bathwater. As you said he is attacking the principle. However, bitcoins may very well never need to be currency for the network to change the global economy. The principle behind bitcoin might not matter. IMO Krugman is making the faulty assumption that bitcoin will fail unless bitcoins are a real currency. His arguments might be on point to that extent, but bitcoin is much more than that.

A few days ago I posted an interview a few days ago where Kevin Rose interviewed Brian Armstrong of Coinbase. What I thought was most telling, was how Armstrong only referred to price in terms of raising awareness of bitcoin. IMO from where he is sitting, he wants to see people use it to move 'real' money. Bitcoin might be the http of money, but not money. Krugman should see that. David Woo of BoA sees it.

EDIT: Timothy B. Lee makes the same counterargument in the WaPo. It's no less fluffy as mine. I could be a staff writer.