The problem is that few people are willing to fix their price to a BTC value because it is so unstable. It is a chicken and egg problem.

Absolutely! A first step could be updating prices periodically, perhaps on an hourly or daily basis, rather than every second.

Just like Zimbabwe in the good old days of 2008, "updating" prices constantly would have deleterious effects on purchasing by normal people.

When prices in some system have to be updated constantly to reflect another metric (say, USD), it may be more efficient to just use that other metric in the price. This is what happened in Zimbabwe.

Updating them constantly will be bad, yes. But prices don't need to remain perfectly fixed. Prices on Amazon, for example, fluctuate all the time. Most products stay at the same price, but plenty fluctuate a couple percent on a daily basis.

Except this isn't going to make sense unless my paycheck is in Bitcoin. I'll still have to do the currency conversion in my head because I get paid in USD.

...which is something to start considering. Maybe not your paycheck right away, but small amounts of money, you know, the type of "savings" that women in China pour into bitcoin these days. Coming from a culture with a very strong "savings" ethic, there is a certain "pull" exacted by bitcoin. It's also fascinating to study some deflationary models which until recently I was convinced (like everyone else) could never work, well, I am not so sure anymore whether they would not lead to an improved economic system:

http://mises.org/document/3726/

Actually the bigger news would be if you could pay taxes in Bitcoin. If that happens a currency has arrived.

That won't happen.

Governments routinely force their citizens to use a currency under state control. One of the ways they do this is by insisting that taxes are paid in the national currency.

You can't pay US taxes in GBP. GBP is a currency.

You can pay GB taxes in GBP though. Why must you assume taxes = US taxes?

The point is that wherever you happen to live you can't use most currencies to pay your taxes. If I live in France, Dollars, Bitcoins, and Pounds are all the same in this respect.

This is likely the key to BTC value stability, but at present it's still over the horizon. The number of users continues to increase, the supply of BTC continues to increase. It's still being used as a speculative investment/commodity. Once the number of users becomes more stable (or the growth rate is less jumpy) and the speculation quiets down (to be more like a forex market?), then it'll be feasible for vendors to stick to a price with less risk of getting hosed or hosing their clients.