When Bitcoin is priced as a function of the goods and services and the productive capacity of the community surrounding it, as well as the cost to mine it, the value is more stable and real.
If the value of bitcoin falls below the cost of mining, difficulty will fall as mining slows down. As long as there is mining to do, the market will find a difficulty level to make sure it's profitable for someone to do it. (If difficulty falls to 1, someone could just switch on their miner and claim the 50 BTC with no cost at all.)
I agree with casascius that the value creation of the bitcoin economy will back the price of bitcoin. In the long run that's what will drive demand and mining will become less important.
Would be interesting to see a plot correlating network difficulty and bitcoin value (as based on a basket of commodities and currencies).
Agreed.