We can thank a number of factors for lessening the bitcoin exchange rate volatility. Some of the reasons which caused volatility before
will return, but one of them is probably gone for good -- that one being the difficulty in moving funds to and from the exchanges.
A while back, only the trader's cash balance already at an exchange would be the only thing that could slow a selloff. A single trader or a few others acting in unison with lots of cash available for buying and lots of bitcoins for selling had full control to move the market price.
Nowadays, however, when there is big drop in the price there are plenty of buy-and-hold types with cash on the sidelines waiting to buy the dip. Ether that cash is already at the exchange, or can be moved there quickly. This is thanks to innovations like Dwolla itself and now Dwolla Instant as well but also thanks to the cash deposit at a bank method using BitInstant, 1 hour SEPA bank transfers at Intersango, and cash purchases at AU post offices. Being able to quickly move cash to the exchanges has softened the blow of selloffs that occur either due to impatient sellers, events that shake confidence (e.g., hacks or actions by banks and governments) or just as likely, intentional acts by price manipulators.
Dwolla Instant's limit is just $500 but that is $500 more than you could get before they started offering it. And it can be used in a lot of places.
The potential from Dwolla comes in how there are many exchanges where Dwolla is accepted directly:
Mt. Gox, Intersango, Camp BX, and BitFloor
or where Dwolla funds can be used to transfer through BitInstant to:
BitStamp, CryptoXChange, VirWoX, BTC-E and Bitcoinica even
Previously there were price moves at one exchange that were not matched with corresponding price moves at other exchanges. Arbitrage was difficult because unless the arbitrageur already had funds lying in wait, opportunities to trade and profit couldn't be exercised. At least now these opportunities (which represent inefficiencies in the market) are smaller and last a much shorter amount of time thanks to the ability to more quickly move funds to and from the exchanges. It still isn't instant though ... the range for when the exchanges give credit for incoming Dwolla transfers can be ten minutes or it can be ten hours, and that's still a frustratingly long wait compared to "immediate". And it still isn't cheap (there are relatively high fees for using BitInstant, for instance), but it is a vastly superior situation to what existed back when we could see a 20% price move down one day and then back up the next day simply because that's how long it took to get funds into position before bitcoins at the lower price could be purchased.
But if you look at where arbitrage opportunities remain, they tend to get cleared quickly in BTC/USD markets where Dwolla is one of the deposit methods.
And that's just methods of getting cash in to take advantage of buying opportunities. There are many factors that happen to also work to lessen the price spikes that can occur as well. In addition to an even wider variety of methods for cashing out (e.g., to reloadable ATM/debit cards, to MoneyPak, etc.) we now also have methods for buying and selling CALL and PUT options (MPOE) and we also have Bitcoinica with its leveraged margin trading for its BTC/USD contract-for-difference market which is where those who think the market is overbought usually show up first. And a bitcoin-based market for securities (GLBSE) gives the ability to immediately convert between equity shares and bitcoins. Long term, this may have a tremendous impact on bitcoin liquidity.
So, Bitcoin's ecosystem is getting large enough that a single component like Dwolla Instant itself can't do much to hurt or harm bitcoin, but combined with all the other improvements, Dwolla Instant is something definitely nice to have available.