The transaction fees should be raised to 1 or 10. The reason for this should be clear if you go back to the Gavin Andresen video where he showed the stone money. What will happen you will be forced to use a wallet. A small wallet will operate just like bitcoin, in a centralized fashion your money on an exchange or on a bitcoin mining pool is a wallet. Thus, your wallet will be fast. However, the real money the "gold" is stored in the bitcoin chain.
Now you say it would make BTC worthless. Think about how the gold was stored in the federal reserve large bars worth about 2 years income. When the 1st coin was made, the lydian lion, its value was set at about 1 months salary.
What are the benefits? The block chain will be extremely fast to download, less than 1 mb a day. It will also use far less bandwidth. The usability will be fast you can use an exchange like mtgox, for instantaneous transactions.
However, I think the goal should be to set the transaction fee, to keep the block size growth less than 1 mb a day. I would estimate that to be 0.1 today and possibly 1 at the end of the year.
Your small wallet could also be decentralized, possibly.