Can you explain to me how you think real world cash will make its way into this system?
For instance to replace current bitcoin exchanges, there needs to be some kind of "bank" entity that accepts cash and gives out a "CompanyABC USD cash value" that can be bought and sold from this company, and then into any other currency on the open transaction market? Or do you think it is more likely that people will deal cash in person and then transfer a digital assets?
With or without OT, people will use exchanges and banks to move in-and-out of "real cash" (as you put it.) This is already occurring (see MtGox for example...)
The long-term solution--to eliminate exchanges entirely as a bottleneck--will happen with the Ripple protocol.
You have the same problem with Ripple: unless you're depositing XRP, you will have a currency issued by someone who's backing its issued currency with real cash (or Bitcoin or clams).
So that will be the point of entry for fiat -> digital currency, and there's your exchange.
Unless I'm missing something.