Thanks for explanation, but I think this is solvable. Ripple can probably either attach contracts to IOUs (the ones that grant trust would accept their terms), or there could be just some default contract for builtin IOUs (e. g. for BTC: redeemable upon request within 5 business days).
The issue is:
1) without liquidity providers, the ripple IOU market will be very illiquid and sending IOUs will be very difficult to find paths
2) with liquidity providers, it is impossible for an algorithm to calculate the value of something, even with advanced contracts. everything has a different value to everyone depending on circumstances
3) with liquidity providers but allowing to user to specify the value, it's going to require too much micromanagement, and the default settings will still lead to either 1 or 2.