1. Buying goods with Bitcoin decreases value as merchants immediately cash out. New money doesn't flow into falling prices of Bitcoin.
I know a merchants that don't cash out.
2. Numbers aren't easily digestible. Ever pay 0.004994321 BTC for a loaf of bread?
0.004994321 BTC = 499,432.10 μBTC and what's and easier way of representing $499,432.10?
3. BTC is not deflationary. Altcoins such as LTC extend the supply if adopted.
Whether or not BTC is deflationary will be determined by the market for altcoins. Capital may be mostly attracted to BTC and if BTC proves itself to be technically sound it will stay there.