Had the exact same thought a while ago. To be truly useful as a currency for transactions, you would need to remove the speculation from the equation. A merchant accepting BTC would need to convert to cash instantly.

Here are the hurdles from what little I know about payment processing.

When merchant accounts receive an electronic payment as it is, the money is not immediately available. at least 24 hours but up to 72 (depending on the payment processor and your bank) passes before your funds are available in your merchant account. I believe most of this is for verification of funds between banks and fraud detection, and I don't know how much of that diligence could be cut out given the potential different mechanics of BTC processing. Bottom line is that is far too much time and the value would fluctuate too much.

Payment processor compete, and they compete on rates. Their processing fee margins are razor thin, - less than 2% often, which they make up in volume. With BTC, the value fluctuate so rapidly, could this razor thin margin be wiped out in even the shortest processing time?

Just what I was wondering when I was thinking about it. Feel like the conversion to USD would have to be as near instantaneous as possible, but the USD side of the equation won't let that happen, and the margin to mitigate might destroy it competitively. Can't say I know enough to say I'm right in thinking that though.