based on untested (and obviously flawed) protocols and trust in a completely unregulated private company in another country (or even our own).
The whole point of BitCoin is that you don't have to trust some private company. Sure, the exchanges are companies, and when you wire money to an exchange to buy bitcoins, you need to trust that exchange and may lose money if that exchange happened to be Mt. Gox, but once you take the bitcoins out of the exchange, you are not dependent on any company. The system is run by miners all over the world, and no single miner can control the network. You need at least half the mining power of the entire network to even have a shot at fooling the system.
Of course you can't, at this time, compare the solidity of bicoin to that of the euro or dollar, but I would certainly prefer it over the currency of certain countries in South America or Africa. There too, the value of the currency is determined by how much people are willing to accept it for. If trust in the country is lost, the currency goes down the drain and people have to pay for bread with wheelbarrows full of banknotes. There's really no fundamental difference.
Personally I only invested an amount I can afford to lose, and consider it a very risky investment with a potentially huge reward. Obviously at this stage it would be utterly stupid to put your life's savings into it. If BitCoin fails, it will indeed have been a pyramid scheme duping people into losing money. If it succeeds, it will be obvious that this was no pyramid scheme and people who missed out will kick themselves for not seeing the obvious potential. Hindsight will tell which it will be.