The best current use case is transferring money. Assuming bitcoin is relatively stable hour to hour (which I think it is) and both sender and receiver have access to an exchange that will convert bitcoins to their local currency, it can be effectively used to avoid large bank charges.

As long as the sender converts their money just prior to paying and the receiver converts back to local currency soon afterwards, there should be no problems.

I guess the big assumption here is both parties have access to a reliable exchange that can easily handle the volume of currency being transferred.

So you've just replaced traditional fees with two exchange fees.

But with each exchange fee only 0.65% (MtGox's highest rate), 1.3% is competitive with many other transfer methods.

Now add the fee to get money into the exchange and another fee to get money out.

$0.25 per transaction using dwolla. Roughly $5 to use SEPA. or worst case $15 bank transfer.

Compare that to the fees charged by Western Union or Money Bookers or credit card companies.. You're looking at $30 minimum + 6%-12%

Actually since the beginning of the year bitcoin's price has been relatively stable, around the $5 mark.

Whether this is the natural market price or if there is manipulation going on is hard to tell.

Certainly bitcoin is more volatile than the dollar, pound or euro but those currencies fluctuate in value too.

Bitcoin will be volatile whilst new coins are being minted, it is in an inflationary phase and the only upwards pressure will come from demand outstripping the supply.