This is almost certainly a bubble at the moment. I for one have sold all of my bitcoins in anticipation of a crash.
EDIT: And within an hour of me posting that, the crash has come.
EDIT: And within an hour of me posting that, the crash has come.
Also, this is a chicken and egg problem. Merchant won't accept bitcoin because consumers don't use it, but consumers won't demand bitcoin because merchants aren't accepting it. Obviously something have to happens to break the mold. If you want to make a "novelty" currency useful, you have to start using it, but no "novelty" currency is guaranteeing to succeed. However, with bitcoin, the situation is changing. More merchants are accepting bitcoin everyday.