Of course Bitcoin, as it exists today, won't have mass appeal. But even compared with a year ago, a flash in the pan really, it is riders of magnitude more secure and user-friendly now.
Ya, bitcoin has really come a long way. It was just a year and a half ago where there was still an unclaimed bounty to figure out how to spend when all you have is a private key, for instance:
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http://bitcointalk.org/index.php?topic=3638.msg51986#msg51986But Bicoin has a lot further way to go to catch up to the ease of use and security of its competitors.
Being an open source project with no organization pursuing a vision and a budget to execute on it, it is then absolutely amazing what has been built for Bitcoin already. But bitcoin isn't the only payment system to end up here, late 2012, without having all the problems solved. The retail payments industry has attracted positively enormous amounts of funding and there really isn't any one model that is gaining traction. Because Bitcoin can basically copy whatever methods work for others, not being the first isn't necessarily a huge problem.
For the non-technical end-user security issue, the resolution to that will probably be something along the lines of what Square is offering with their "pay with your name" retail payments service. This service uses the concept of geo-fencing. Meaning that a mobile app's function varies based on location. With "pay with your name", the backend host knows where the customer is (location based service on the user's mobile) so simply being present (within the geofence for that merchant) gives authorization allowing a merchant to perform a charge up to some level (e.g., purchases up to $20 at a Starbucks).
Sure this is a centralized system but so are hosted (shared) EWallets (Coinbase, Paytunia, Easywallet) and there aren't many complaints by those users.
The great thing about this is that nobody is forced to follow "the officlal method". There are methods of holding and using bitcoins that works for me that you wouldn't want to use because your tradeoff between convenience and security might be different. The financial service whose threat model mandates they use M of N signing for their cold wallet uses the exact same Bitcoin network as does the teenage patron at a coffee shop who pays using a mobile phone.
