Yeah, I really don't see the advantage of bitcoin over cash for in-person transactions. I think the killer app is somehow micro-payment related.
In the context of the title of this thread, the advantage of bitcoin for in person transactions is that if the cops are waiting for a deal to go down so that they can swoop in and confiscate everything to pad their budgets, it's much harder to take the bitcoins once the transaction is gone. Particularly if the wallet.dat is encrypted on a remote server, overseas.