OP is both absolutely right and absolutely wrong.

Absolutely right in that price fluctuations will make bitcoin difficult to use for normal commerce for the foreseeable future. Absolutely wrong in that he assumes this problem will kill bitcoin.

Additional protocol layers will be built on top of bitcoin which will provide stable currencies pegged to dollars, gold, oil, or anything else your heart desires. Think about how HTTP is built on top of TCP/IP. That is how we will build new, stable currencies on top of bitcoin.

I wrote a paper about it, and if you are going to the bitcoin conference in San Jose in May, you can come to the "Bitcoin in the Future" panel and hear me talk about it and ask questions.

The take-away is that buying bitcoins now is the best way to bet on the success of those "child currencies"