Those aren't downsides of bitcoin, they're downsides of unregulated trading markets controlled by a single entity. You'd have exactly the same problems if MtGox was trading horseshoes.

Or, say, Magic cards (which is exactly what MtGox was originally, hence the "MtG" in the name).

But isn't the point of Bitcoin that it's unregulated and akin to digital cash? If you start regulating it, what makes it any different or better than using cash? What's the point, then?

Your confusing the currency (Bitcoin) with the Exchange/Custodian (MtGox). You can leave the currency unregulated, but police the exchanges that trade it.