I agree. I have solved this problem.
*No one cares about trading between BTC and LTC. The problem we need to solve is how do a few billion people trade BTC to and from USD, EUR, CNY, RUB, and JPY?
(*)For statistically significant values of "anyone"
I agree - what we need is a turnkey system that uses 'accepted practices' to turn bitcoin into fiat. It would be smarter to operate in your local nation only. The idea is you run just a bit of a margin relative to some exchanges (aka be willing to buy large amounts of bitcoin for under market rate) and immediately fund the end user via alternate payment processor (paypal, dwolla, check, direct deposit, etc).
Give the user the option of taking a small hit re:price to sell to your service knowing that they'll have a check to deposit in ~3 days. Really (at least domestically) you could simply deposit into someone bank account.
The leaves your service having cycles where you have to sell & wire the fiat to yourself. Easier for the end user... bit of a headache for the service provider. It doesn't solve the problem of users having to trust the exchange not to mess with their funds.
A P2P decentralized exchange is critical for the adoption and widespread use of cryptocurrency. Fiat has no future. What is needed are mechanisms to convert the daily plummeting value of fiat into cryptocurrency. Online sites that do fiat conversions like bitinstant, btc-e, and mtgox can plug directly into a P2P decentralized exchange. Fiat conversions are a political problem not technical. We need to focus on the technical aspect and let the current political libertarian revolution continue...