I don't see how this is realistic; the needs for bitcoins will be endogenous to the people using it, whereas the supply increases based on arbitrary constants (until it stops increasing altogether).

That says to me that the more people that use it, the more volatile it will become (especially after the supply freezes). When it becomes less volatile, it's merely because the needs coincidentally line up with the supply (i.e. when transaction volume drops -- fewer people 'using' it).