This makes a pretty good argument for having a large number of Bitcoin processors ready to accept physical cash in exchange for Bitcoins. I could see a large-sized city supporting a Bitcoin processor. Heck, it doesn't have to be a full-time job; just have specific posted hours when you're exchanging Bitcoins for cash. It'd still be a lot faster to drive somewhere and exchange cash than wait for something like Dwolla to work out.
No doubt cash is the perfect bitcoin complement.
But a couple of the short term compelling markets for bitcoin don't fit so well
- online payment
Still easier to sign up for paypal than to withdraw cash from your bank, then go out and buy bitcoins with cash
- International money wire.
Bitcoin is brilliant for this, but nobody wants to buy a large quantity of it with cash.