It could be a bit of a hassle, generating/hiding all these paper wallets, usb backups, updating them all with every change.
Indeed. And the Bitcoin evangelists actually expect the Average Joe to go through all that hassle.
Ain't gonna happen.
This is the reason BTC will never go mainstream. (I.e.: It will never be used by, say, as many as 20 million people.) It's just way too user-unfriendly.