I noticed bitcoin on bitfloor was $10 more than mt. gox's price for btc!
Well, BitFloor doesn't set the price. The price you pay depends on what other traders are willing to sell their coins at.
If you were patient and put in a bid at a price, let's say $2 over Mt. Gox market price, you probably would have gotten your order filled within an hour or two. Normally the difference between BitFloor and Mt. Gox is much smaller, and sometimes you can even buy below the Mt. Gox price.
So what you saw was the herd of people unable to use BitInstant all swarming the sellers on BitFloor. So of course you ended up overpaying.
To get more sellers noticing the arbitrage opportunity, I used to see people announce their intentions (e.g., buy volume and what they were willing to pay) on a forum thread and/or in the #bitcoin-otc IRC channel. That way sellers could have time to get coins deposited and put sell orders in to be able to score a nice trade.
So to summarize, your next transaction paying cash to buy coins at BitFloor will probably result in a better experience. There is also BitMe.com which you could try. They use cash deposits through Chase and have a different order book -- currently even lower than BitFloor's.
