Actually that isn't that far from the point.
It being exchangeable isn't the issue here - that it's value is derived by the amount of cash put into it is. The currency must be representative of something valuable, namecoin goes in the right direction, but the concept can be extended much, much further.
There are even discussions of how the mining network itself providing something of fundamental value. The pinnacle would be that the secret needed to spend the coins to represent fundamentally valuable information.