The BitCoin system has guaranteed deflation because lost hashes disppear from the monetary system forever
Deflation is actually built in intentionally if you look at it's production curve (and assume market growth). The claim is that deflation is not an issue, though I'm not sure how much/if this is backed up by theory. I have yet to hear a well supported argument about the merits a deflationary currency.
In addition, the current total value of the BitCoin currency (expessed in any normal monetary unit you'd care to name) is far too small to be a viable currency
Why do you say that? By what standard? It's total value is only important with regard to the size of the market which uses it. As long as its growth matches market growth, the value of the market vs other currencies should not be the thing that gets in the way.
It would have to deflate by several thousand percent to be any more than a niche currency
I think that's the hope.
Since no one would volunteer to be the victims of such deflation, BitC's are doomed to irrelevancy.
Who are the "victims" of deflation? Deflation results is effectively appreciation of the currency. Anyone holding them gains wealth. And that's effectively deflation problem in that people would rather hold than spend when holding effectively increases wealth.