The main advantage is that you can do commerce with the people who aren't technically savvy. Someone may not want to use bitcoin (for whatever reason) but being able to hold some local currency in their hand and being able to buy/sell stuff with that currency would connect with them. Meanwhile they are indirectly holding bitcoins and gain the benefits of bitcoin (in this case, a stable store of value). Of course the preferred method is going to be doing btc to btc transactions but until then a bitcoin/local currency hybrid is the way to go.

The ideal currency would back their currency at its full value in equivalent btc. It would be similar to a demand note where you can take the note to the issuing authority and get the equivalent btc in full. Likewise, you could go to the issuing authority send btc and get the equivalent amount of notes.  It would be like the old gold and silver certificates. The issuing authority would make its money by transaction fees or no fees if donations are used instead (ie. non-profit model). A local merchant would probably donate if they got some advertising or something?

The whole idea here to allow more people to use bitcoin indirectly. Local currencies have been around for ages so the concept of a local currency resonates with people while bitcoin is more technical. For the most part the technical nature of bitcoin is where most people get issues with bitcoin (since they don't understand how it works). For all of us, we are all technical savvy so bitcoin works fantastic for us. Grandma, on the other hand, not so much.