The example of using as a replacement for international payment seems to have one "buy" and one "sell" of a Bitcoin in the middle. My simplistic understanding is that neither of these will be done in seconds with the need for confirmations. I thought I'd read that it was minutes, and could approach an hour.
Yes, a confirmation could take a average of ten minutes, so in low trust situations, this would take about ten minutes instead of a few seconds (still way faster than other methods). However, exchanges are very unlikely to try to pull double-spend attacks against each other, and can (and already do) use so-called "green addresses" to send BTC back and forth, which are addresses publicly known to be used by exchanges and considered to be trustworthy.
Isn't there also the usual bid/ask cost at each end of the whole transaction? In other words, I start with $100, and by the time it goes through the buy/sell process, it's not even $90 at the other end. Is that completely out of line?
It's quite unlikely that it would drop so much in such a short span of time. Possible, but unlikely. And these fluctuations are only going to decrease and the total "market cap" or bitcoin goes up, since it would take proportionally larger trading sums to move it by the same percentage amount. As for exchanges, you would only need one to convert to BTC, and one to convert from BTC. One other benefit over PayPal is that you don't have to worry or care about which system the other person is using. I.e., if we use PayPal, we both have to use PayPal, and submit to their restrictions and fees. If we use Bitcoin, you can use MtGox, I can use Coinbase, and we don't care about what the other person uses, and can switch from whatever we use should we find fees or restrictions too inconvenient.
The idea of Bitcoin as protocol is an interesting one though it can only carry Bitcoins, and it's not
entirely loss-less as I understand. Isn't there a small "fee" levied somewhere along the line for the
transmit?
The fees are, as of yet, not mandatory. Most "normal" transactions can go through just fine without a fee (normal as in average size without small amounts lumped in). If you send an unusual transaction without a fee, such as one comprised of many inputs (say 10x 0.1BTC to send someone a single BTC), or include some extra code in the transaction, sometimes it may take longer for a transaction to be included in a block. If fees are included, they are typically less than a penny, so it's still not much of an issue.
As for it being only able to carry a bitcoin, that's not entirely true as well. Rather, that Bitcoin doesn't necessarily have to be a bitcoin currency. Check out
http://www.whyisn'tbitcoinworthless.com (same as in my sig) for some examples of what else the bitcoin protocol can be used for (specifically Colored Coin, digital contracts, and notarization by including a time-stamped hash of documents in transactions).
