I would allow people to purchase this virtual currency with US Dollars using their credit card. Facebook does this all day long so it has to be legal. I would allow people to buy and sell the virtual currency with BitCoins. Unless the act of trading in BitCoins itself is illegal, this should be legal as well.
I don't know about American laws, but will use an Australian supermarket as an example:
Coles can legally accept cash or credit card payments for purchases.
Coles can legally refund cash or credit card purchases.
However Coles cannot (as far as I'm aware) legally accept credit card for a purchase and then refund that same purchase in cash. It can only be credited back to the exact same card that was used.
I think this maybe has something to do with money laundering.