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.
Confiscation is a good point I hadn't thought of.
But my original point was CREDIT. As far as I know, pot dealers don't take credit cards... nor do they sell on convenient credit terms.
Thus, Visa --> Bitcoin
Bitcoin --> weed
The first transaction is not anonymous (the credit card)... but all you bought is Bitcoin.
The second transaction -- with a completely different party -- is anonymous. And, presumably, that's the transaction you'd want to remain anonymous.
Since you gotta physically meet the guy anyway, cash probably is easier. However, since you don't have $200 on you.... and all you have is that credit card mom and dad got for you "in case of emergency"..... This method lets you buy weed ON CREDIT.