Does anyone have an idea how this would practically work?

I understand if the money stays in the black market economy, but once the government is serious about Bitcoin and has a few data centers following all transactions in the block chain, we'll have to be accountable for all transactions into and out of our wallet.

It'll be the perfect system for taxation, and I can't imagine how some of these anonymous funds will ever interact with your real identity without sending up a million red flags.