- The short term issue of BTC is clearly stability. Prices tend to fluctuate too much, especially when the general public reads about it and suddenly buys some.
This matters when looking at bitcoin as a store of value. It really matters little when looking at bitcoin as a payment network. A $20 today will get you $20 worth of btcoins. A month from now, $20 then will get you $20 worth of bitcoins then. When you look at it that way, the exchange rate is irrelevant.
As far as volatility, that's the result of having low liquidity. There are a few "first time" events coming up (e..g, first block reward drop, first shipment of ASIC miners, etc.) so there is understandably uncertainty. Not much you can do about it.
- As no country/state/city/physical place recognize BTC, all prices are just converted from USD, especially for physical goods.
The mtgoxUSD BTC/USD market is well over 50% of all trading yet. That percentage been dropping, so eventually to obtain an accurate "current market price" will require a basket of markets to be evaiuated to determine where the true market price is for each other markets that exist. But arbitrage does a decent job of keeping exhange rates relatively in check with each other.
- It is impossible to live off BTC.
Perhaps in clusters like in Free State New Hampshire bitcoin will start to be used more widely for in-person commerce.
Is the combination of those factors too big for BTC to be a successful currency in the future?
Successful, meaning displacing fiat? Bitcoin won't do that.
But how many other projects in which there is no formal organizational structure, no marketing budget, no backing by some multimillionaire, etc. that you are considering investing or participating in. There must be something to it that caused you to be reading this right now. That something shows that Bitcoin is so much more than an electronic store of value, so much more than a medium of exchange, so much more than a unit of account.