Even with bitcoin, fractional reserve banking is inevitable.
You need to differentiate between fractional reserve banking and credit expansion. Historically, they coincided, but Bitcoin makes it explicit that there is no necessity for one to lead to the other.
Also, people are mistaken when they think that bitcoin will destroy credit cards. People like credit cards because of the security they provide. They want chargebacks. Ultimately, even if bitcoin does take off, people will use bitcoin-backed credit cards (or paypal) because they want the ability to call up the credit card company and dispute a charge.
Reversible payments can be implemented with Bitcoin natively, without a derivative medium of exchange (escrow based on multi-key signatures). Based on the impression I got from the developers, multi-key signatures will probably become practically usable (i.e. the will have a working user interface) sooner rather than later. In fact, probably every feature related to payment processing and financial systems that you can think of is possible to be implemented with Bitcoin natively, and in a more efficient manner than it was historically the case, and be voluntarily agreed by the parties to the transaction (as opposed to centrally determined by the payment processor). Merely because it can't be accessed now or is not implemented in a usable manner isn't important.
The only two projects I realistically see as having a chance of bridging the gap between Bitcoin-FRB and Bitcoin-credit expansion are Ripple and OpenTransactions. They may be able to provide some features more efficiently than native Bitcoin. I still don't think it is likely, but if it ever happens, it would be through decentralised systems like these two rather than banks.