> The next step seems to be to create a regulated market - anyone know what that means, or whether there is something inherent to Bitcoin that doesn't allow it?

It means commodity exchanges dealing in Bitcoin regulated by the CFTC or similar entities in other jurisdictions. There are some already, but they do a very small share of Bitcoin volume.

> Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.

That's money transmitter stuff, which is a different set of regulatory requirements.