If I were a merchant and sold something with a 20% gross margin, I would like you to convert 80% of the BTC I got into USD and keep 20% of them as bitcoin. So why not offer the choice to your client? If only black or white choice, as a merchant, they will get running-out-of-working-capital problem if keep all the money in the bitcoin they get paid.
If you offer the partially-exchange offer to the merchants, it will easily get them to keep some of them. later, They will spend more time to know about bitcoin and may try to use bitcoin themselves. This will make it a more widely accepted currency.
Yes, I agree...we are initially offering either BTC or USD payout, but merchants will want more flexibility than that. The hard part is doing it in a way that doesn't thoroughly confuse people. That's a great point you make about it enabling merchants to dip their toes in the bitcoin pool so to speak.
You would be surprised, I have been working with e-commerce clients since around 2000, most of them don't even understand interchange rates. You want big adoption, make it easy to integrate into the major shopping carts. Make a wordpress plugin that will allow purchases with bitcoin. There are a ton of people (quite a few adult sites - especially single girl sites/cam girls) that cant or dont understand how to setup a merchant account. Open the door to these sites and you will start to develop an undercurrent that while isnt mainstream will have tons of mainstream users. No matter your stand on adult entertainment, it has pushed innovation on the web since the beginning.