"The network never creates more than 50 BTC per block and this amount will decrease over time towards zero, such that no more than 21 million will ever exist. As this payout decreases, the incentive for users to run block-generating nodes is intended to change to earning transaction fees."
I think the anonymity and decentralized design are more important than the small transaction fees. As a sibling comment points out, there are still fees for converting to and from national currencies, which are much less volatile.
Not for the transaction. The fee is for currency exchange. Should BitCoin be used for more than just purchasing products from Silk Road, it's conceivable that people might one day be prepared to use Bitcoins as a standalone currency.
If you point out that it has poor usability for payment, well, it's actually a way to store your wealth. If you point out that the volatility makes it a bad idea there, well, it's actually a vehicle for speculation. Why would you speculate on randomly-generated numbers? Well, because it's so good for payment... or keeping your money away from the government... or... crap.