It's true, Bitcoin transactions with a 0.0002 fee are confirmed very quickly. And even credit card payments can be reversed many days later. So even though the transaction is unconfirmed, it's still received "instantly".

I agree there is still a chance of a double spend attack even if you paid the right tx fee.  Double spend is done by sending another transaction that has higher fee and be confirmed faster than the previous transaction.  I think having Bitcoin notes or physical bitcoin money can solve this but there are more risk involved on that and need a centralized system to make sure that the private key of each physical coin is not compromised.

It wouldn't be hard to backup your wallet, make the payment, then restore the backup and add a huge miners fee and empty it.

I'm working on a project to make transactions faster when using Bitcoin in shops. It's a long way off and probably not to every-bodys taste though.

It could work for online, seller can package product ready to ship, but in that case they'd just wait for confirmations anyway.

Read this. https://en.bitcoin.it/wiki/Double-spending

The confirmation or validation method was resolving it.

The Vendor will be a fool to trust anything, but seeing the actual confirmations on his own wallet.
Other Screens can be faked. Most Vendors won't have the expertise to know if they are being tricked or not.


 

Yes it is true that for merchants card payments have higher risk of chargebacks but with only one confirmation bitcoin payments is safer for merchants. Fee is not fixed and 0.0002 may be only enough for transaction with one input and two output.

Just pay 30 cents and your transaction will confirm in less than 5 minutes or pay more like $0.5 to get a confirmation under 3 minutes.
With paypal or credit cards you are usually paying more fees than above and even if you'll end up paying the same fees you know that you could always mine altcoins exchange to bitcoin and there you have printed your own money as well there are not stupid limitations on bitcoin.

There is also a way in which the merchants could be linked to nodes directly for transactions to be broadcast in blockchain immediately, though I'm not quite sure how do the nodes receive transactions and in what orders?

You are confused.  
Blocks being found is not dependent on the fee you pay, that depends on when the miners find a block,
and the rated block speed is every 10 minutes. Higher fees just means the miner will add your transaction to the next available block when they find it.
On Average a block will be found ~ 10 minutes, so any fee that gets a transaction included in one in 10 minutes, there is no reason to pay a higher fee than that.


 

We had a meetup at a pizza joint in Vegas on Saturday where the check was paid via bitcoins. Upon paying, we were gone sans waiting for any confirmations. Ergo, a nonissue, akin to not having to wait around a vendor's shop for months till he's satisfied that you're not going to reverse the credit card payment. Defense mechanisms are in place and where even the rare nefarious actor that's able to game the cryptocurrency-payment system are chalked up as the cost of doing business. I can easily state that more money is lost in any B&M business via employee thief and incompetence at the till than cc chargebacks and rogue crypto payments combined, the [estimated] dollars lost making up a percentage of the product or service's price point.