I agree it's taking a step backward in a pure technological sense. However, this step backward from Bitcoin is necessary to move everything forward.
To me, Ripple's failure would have no impact on Bitcoin, and Ripple's success could mean a good chance for Bitcoin to grow.
Ya. It just means that I have to rely on Bitcoin to buy magic carpets from Iran and to make donations to wikileaks. But I still think that Ripple could be made better by incorporating superior technologies like Bitcoin with the concept of gateways, or some other method of increasing the decentralization of exchanges.
On the other hand, the only service I've needed to convert bitcoins between dollars so far has been localbitcoins, and I'm not sure what would motivate me to use a ripple gateway for that purpose. I can understand the benefit of ripple gateways as a stable pricing mechanism for the whole network, but from an individual's perspective, I don't see what benefits it offers. People already have many places they can go to convert dollars to bitcoin so I'm not sure where the motivation will come from to bring mass adoption of the Ripple system. If you were to draw a comparison between Ripple adoption and Bitcoin adoption, what new benefits would you say Ripple offers the individual over what options are already available for the individual? What drives the individual to choose Ripple over all other options? For Bitcoin, this is incredibly clear to the end consumer, without any need to understand how it works; it makes payment a hell of a lot easier than all tradition methods before it and lowers fees. What does Ripple have to bring to the table that is a clear benefit to an individual who has not looked at the Ripple technology and has no understanding of how Ripple is supposed to benefit the world? If I want to convert currencies, I would go to a business that offers currency conversion, I would then give them one currency and expect for them to hand to me the currency I asked for... why would I care how this business does this for me? As the end consumer, all I care about is that I'm given the currency I asked for in exchange. So why does the end-consumer care about Ripple anymore than any other crypto-currency?
The receiver of fiat IOUs needs the services of a gateway to receive fiat, and they must pay a fee. But it's the same with Bitcoin. "Competitive" BTC to fiat rates today provide poor value to the consumer.
If Ripple becomes the new platform for the "businesses that offers currency conversion", costs will be slashed for exchanges and gateways and rates will be much lower for everyone.
You could send your cousin in Mumbai rupees directly to their Ripple wallet paying virtually no fee. Of course, they'd have to pay a fee to get their rupee IUOs out of the system. But on the whole, the fees would be much lower than they are today.
Bitcoin can only work to supplant other currencies slowly over time. It will be a long process. Bitcoin = apples, Ripple = oranges imo.