Since my $1,000 worth of bitcoins dropped in value to $150 over a period of weeks, I've become significantly less interested in using it as a currency.
A person or merchant receiving bitcoins can easily convert them out to USDs and still lose less in fees than the same transaction would cost compared to accepting a credit card or debit card payment. For example, BTC -> USD at most exchanges is around half a percent.
True, but to be a practical currency it is critical that the value remains relatively stable. A currency capable of dropping from $1000 USD to $150 USD in a very short time is clearly not stable.
Now, for merchants this might not seem to matter, as they might be able to always convert bitcoins to a real currency immediately and never hold them long enough for depreciation to matter, but if the currency is excessively volatile there will never be a buyer at the exchange besides speculators, which prevents the currency from ever being really useful.
Not just not critical, highly undesirable.
Bitcoin is up 400% over the last year (from $1 to $5/BTC), which has made it an excellent investment for other (smarter) investors not swayed by a bubble.
One corrolary you'll note is that because they are both illiquid and volatile, they even suck as a speculative investment: if you make a bad bet you can't get out of it.
Sell the BTC on MtGox and withdraw the USD via Dwolla directly to your bank account. No need to use Paypal!
MtGox's withdrawal limit can be raised to $10k per day if you provide a notarized government ID copy (IIRC). Dwolla's limit is $5k per transfer with as many txfer per day. So it would take 2 days for completing the withdrawal, plus a few days for your bank to actually post the transaction (thank the legacy financial system for these unexplainable delays).
Of course the very best way to do it is to actually buy a car in bitcoins... see the Bitcoin Market subforum and find a seller. I remember last year someone was happy to announce he was the first person ever to buy a used car with bitcoins.
I understand your feelings on this. But the fact remains that the using the "legacy financial system" I can move my money between investments on my etrade account with a latency of minutes. I can buy that car on a credit card or with a personal check with zero latency. Bitcoins aren't remotely there yet.
There may be some privacy or social justice reasons behind pushing bitcoins. They may be fun (I'm sure they're more fun for a hacker to play with than mutual funds). But they're not a serious option for someone looking to "invest" their money, and claiming they are is doing the people you're trying to sell on the idea a disservice.
Also I doubt you can sell stocks on Etrade and withdraw dollars to your bank in minutes. When I do this with my stockbroker (TD ameritrade) it takes at least 2-3 days because the transfer is made by ACH which takes a while to clear.
This latency is perfectly acceptable for stock market investors, therefore I see no reason why it would not be acceptable for Bitcoin investors...