When one person buys 1 USD for 400 BTC, that means the 400 USD is worth 160,000 BTC, but where are all the BTCs?
If that's not a good argument against the US dollar's viability as a currency (and it's not!) then your version is also not a good argument against Bitcoin's viability as a currency.
There are only 2 currencies. Your assertion that the exchange rate is bogus because it is possible to buy 1 BTC for $400 applies just as well in the opposite direction.
Was your $400 + 400 BTC model supposed to be an argument from first principles, or was it supposed to be a reference to some empirical evidence?
I don't think you're being as intellectually honest in this thread as you could be.
I am, however, yet to see a single article talking about USD being quoted in bitcoin. Just like I do not see any articles of USD being quoted in Samsung TVs. I do see bitcoin being quoted in USD. I see USD being quoted in Euros and I see Euros being quoted in USD.
That's why Sansung TVs and BTCs are not currency while USD and Euros are. So BTC is asset. Assets in an non-liquid markets are prone to enormous bubbles.
Do you at least accept that in the market described above coin value is fictitious as soon as totality of the market is value for coins is higher than $400?
[late edit]: Do note that it is not to mean that there's no money to be made before the collapse - there are tons of fools who are willing to part with it. That's why financial firms are starting to salivate looking at it.