1. Buying goods with Bitcoin decreases value as merchants immediately cash out. New money doesn't flow into falling prices of Bitcoin.
People convert fiat to BTC, in order to purchase products. So this effect is neutralized.
2. Numbers aren't easily digestible. Ever pay 0.004994321 BTC for a loaf of bread?
That is why an increasing number of merchants use the mBTC.
3. BTC is not deflationary. Altcoins such as LTC extend the supply if adopted.
Actually it is one of the drawbacks of the LTC.