Just letting you know that any government can take out Bitcoin or well any large entity.
* Given $10 million USD, bot net, or commandeer/rent a super computer or two:
20000, 6870's (20000 * 272 MHash/s = 5.440 Thash/s > "Network total 5.152 Thash/s"
http://bitcoincharts.com/about/) is more then the current mining power of everyone. All one would need to do is just run it for a day generating bad Bitcoins and release the data and it will undo all transfers during that day. Note that custom chip manufacturing would probably be used instead of GPUs. Hmm you could use this to steal all the transaction fees and new Bitcoins. Generate good Bitcoins for a few hours when in the lead release the data. This will give you 100% of the transaction fees and new Bitcoins instead of 51%.
* Bust drug dealers:
Given one drug dealer's wallet you know every wallet that has ever paid them and everyone they've paid. So just follow the money. Given a government or ISP they could just look for what IP sends money from a given wallet and go to that house and bust the druggies or ring leaders. How to get a dealer's wallet? Just pay them and see where the money ends up. Actually you could probably figure it out just by looking at all the transactions.
* Take down the Internet/Bitcoin traffic:
If miners can't communicate then generated data can't be transferred making #1 much easier. Even for a day or two.
Given any of these people will lose confidence in it making it worthless. I wish Bitcoin could overcome these.
Governments will want to kill Bitcoin unless they can easily tax it, but this will require Bitcoin banks and exchanges to be controlled by the governments. Which means all governments will need to agree and share, but when has that ever happened.
I'm open to learning the flaws in these statements. I know I misunderstood how it worked originally by looking at the description. I was like hey there's about a 10% chance that you can undo a transfer given 10% of the computing power of the network. It's more like 1% and that's only if the person you sent to only waits for the initial confirmation and the network won't try to do the transfer again.