I think BTC as in game currency is a great idea. It would be crazy fun, and serve as stabilization tool for the BTC economy.
Imagine if there was a Second Life, Civilaztion type game where you can earn BTC based on skill. This would accomplish three things:
1) Remove the barrier for entry for using BTC- Regular people will begin using it without thinking about the technical and political baggage.
2) Stabalize the economy- There will always be a place where BTC has a use, and a basis from which to determine value.
3) Encourage exchange instead of investing - People will see value in spending BTC, as opposed to hoarding it. Spending in game (investing) earns coins faster than waiting for the price to go up
Spending BTC outside of the game, on products like yours, could be an added bonus to using the currency.
Electrongolf, you are right on. To add to your three key advantages, the sharing of BTC for p2p sales of game artifacts would hopefully make the "IRS Regulations" issue less murky. Of course, any game that has BTC transfers for their product is going to take a cut, so that might be an issue of it's own.
I think we could also take the concept of BitCoins to cheaper arcade style online games as well. If someone were to create a series of low CPU usage arcade games and provide winnings in BTC to high scorers each day, it may serve the purpose to advance the BTC money into mainstream. The arcade games could run BTC miners as part of the website in order to generate BTC. When the day ended, the site keeps a percentage and gives the day's high scorers a piece of the pie as well.
P.S. I'd do it myself, but I am swamped with other programming work.