How could this possibly result in Bitcoins going up? Even if this is handled without any hiccups, this should shake a lot of people's faith (myself included).

This should be a wakeup call for anyone that thinks that Bitcoins are totally secure. What if next time the bug in the client is more exploitable? Someone malicious could potentially take out the entire Bitcoin economy in one day by exploiting it.

If it comes through this with no lost transactions, then the system has proven a degree of robustness.

Only because the community is so small that telling "everyone" to downgrade to 0.7 is actually doable. Now imagine a future where everyone uses bitcoin - imagine getting an institution like a bank to get on the "right" version...

Actually, for this purpose the system is not getting any bigger right now.

You only need to notify miners and mining pools. These have been concentrating for a while and will continue to concentrate in the future.

Individual users who aren't mining don't need to do anything.

While dropping to v0.7 was a method to resolve this in a manner which protected v0.7 users it wasn't necessary. Miners could have continued to mine v0.8 chain. Transactions from the v0.7 blocks would be included in v0.8 blocks.

Users could be warned to STOP using v0.7 and upgrade to v0.8. The advantage of downgrading it is resolve the situation quicker. Far easier to get a half dozen mining pools to switch to v0.7 then get thousands (tens of thousands) of users to upgrade to v0.8. A v0.7 user who followed the warning and stopped engaging in transactions either until v0.7 was the longest chain or until they upgraded to v0.8 was not in any danger. Existing transactions flowed across both halves of the split.

They'll need better systems to deal with it.

Like every other system, including the existing ones, it'll have to get better as it scales.

They didn't tell "everyone" just the people that are running mining operations.

Well, I thought that limited access to bitcoins may result in price going up. But as I see, there is a panic on the market, so btc/usd is dropping quite fast.

Bitcoin still in its 40s at the time I posted.

It depends how it is resolved. If no one loses money, then yeah, it could go up. Otherwise people could lose confidence in Bitcoin and the price could plummet.

After all this is "dealt" with if they are still in limbo use something like pywallet to fix the coins in limbo (if there are still no confirmations after hours)

Beautiful!

I'd sell while it's still in the $40-ish

It looks like everyone is halting trading (at least MtGox and CoinBase are), so you probably won't be able to for a while.

...if you can get your coins onto MtGox.