Bitcoin's deflationary nature is a natural corrective to Fiat's inflationary one. What we are going to see with BTC is a grand experiment between two competing economic philosophies. I am a happy supporter of Bitcoin. Regarding inflation vs deflation, I have lived through a hyper-inflation in the former Soviet Union and find current events eerily similar. If asked to choose between inflation vs deflation, I would choose deflation...though not on the scale of the original Great Depression. Deflation is actually better for society because it encourages thrift and strengthens the ties of a culture. Inflation has its place, and certainly is popular among governments, but cultures which value money and use it carefully always seem to do better then those who throw it away.
For a simplified but entertaining view between the two competing economic schools, I recommend the following two Youtube videos.
http://www.youtube.com/watch?v=d0nERTFo-SkKeynes VS Hayak Round 1
http://www.youtube.com/watch?v=GTQnarzmTOcKeynes Vs Hayak Round 2
Skysurfer808