How divisible are bitcoins? Can I divide a bitcoin? as in could I spend 0.5 or 0.01 of a bitcoin?
You can divide bitcoins into up to 8 decimal places
What about dwindling supply?
n/a - the supply is bitcoins are increasing as miners are mining more coins. This will stop eventually however with bitcoin divisible as per above (and the code could be changed to make it more divisible this is not an issue.
What about the need for banks?
Bitcoin is designed to be decentralized, taking away the need for banks. You will not receive any interest on your funds, however today, most people do not receive any interest once bank fees are taken into consideration.
How are BC's valued(this is more of a question for NewLibertyStandard)?
By the market the same way any other asset/investment is valued. Buyers and sellers meet (electronically) to determine a fair price.