There are plenty of situations where this may or may not make sense.

In most cases it absolutely does not make sense to trade USD -> BTC -> SILVER for an example.

In my specific case, I had been mining BTC for a few months prior to 2013, and all of 2013.  I also put a few paychecks directly into BTC just to hold.  In this time BTC had soared.  Rather than converting my BTC to USD and waiting a few days to receive my money, also paying the transfer fees and commissions to trade on Mt. Gox, I decided to directly trade BTC for silver.  The mark up isn't as drastic as you say, and there are many sites which will mark up physical silver less than $2.  Although silver eagles are relatively expensive, silver buffalo's can trade within this range I mention (currently sub $30 if buying more than a particular amount, only a $1.30 premium to spot).  At the time of this posting, 1 oz silver eagles can be bought for ~ $32 . . . $33, while BTC is trading at BTC1 > $34.

So in short, I've never owned more physical silver in my life.  I'll plan to make a seperate post about this later.  This is one of the best opportunities anyone who holds BTC to get into silver.