The more practical applications something has natively, the less useful it is as a currency.
Why is that?
Two main reasons. The first is that increased demand for the currency makes the practical applications more expensive. The second is that decreased demand for the practical applications reduces the value of the currency. Or, to put it more generally, a change in the demand on one side (practical applications or means of exchange) affects the price on the other side.
These aren't necessarily a big deal and certainly aren't fatal flaws. Gold has this flaw and it was still quite successful as a currency historically. But there's no reason a crypto-currency has to have this flaw, so one would expect crypto-currencies that don't to be superior unless the tying of the currency to the practical application provides advantages that outweigh these disadvantages.
To be clear, I am *not* saying that Namecoin is broken because of this tying. I'm just saying that it's a technical difference between Namecoin and Bitcoin that could cause some rational people to prefer Bitcoin over Namecoin, even if they were both brand new and introduced today.
