I believe what you are advocating (correct me if I'm wrong) is to take away the power from the Fed and return it to Congress?  

Yes, what you've described is fractional-reserve banking.  I'm aware of how the system works.  I'm asking you what is your proposal for an alternative.  Even Islamic banking, which prohibits profit from interest, has aspects of fractional-reserve banking.  So I ask again, can you provide an example of a current successful economy/country that does not employ fractional-reserve banking?

Please don't construe this is an attack.  To my knowledge there are none but I recognize the fact that I can (and often times am) wrong.  What I see is a system that has been corrupted and needs to be repaired.  I don't necessarily see the need to throw the baby out with the bath water.

The middle man confirms that the transaction is authorized by the account holder, handles the ACH disputes, and eats the cost if it turns out the transfer was fraudulent.

It's very simple really...Dwolla is selling something they can't deliver.

Why is it I feel like this is exactly what I do every time I buy or sell?

It's Life's just a game, enjoy it

It looks like MtGox has frozen Dwolla deposits:
https://support.mtgox.com/entries/20317576-important-notice-dwolla-deposit-delays

According to my pal, he got the $1 from dwolla experiments  . They start chargingback their own transactions ?

Unless Dwolla changes that going forward, Dwolla is not viable.