Your reasoning is quite good but the problem is finding the leader who will start the revolution.

Can you imagine Apple selling its next iPhone 6 only in BTC?
Can you imagine Ford selling its next Mustang only in BTC?

Maybe David Bowie could sell its next songs only in BTC?

I'm afraid this is going to happen sooner or later, once you made some bitcoin-only sale, you might never look back at fiat

During the starting phase, some merchants might prefer that only 1% of their sales go to bitcoin, but soon they will find out that this part of the companies sale contribute more than other parts of the sales to the company's total revenue and then they will increase the percentage accordingly

It just a public awareness, I'm already planning bitcoin-only sale for some of my products and I will keep track on the status of those sales

From just your business point of view, getting more sales should be more important. But it could take some time to see the ripple effect of bitcoin-only sale: After some of your customers learned to get bitcoin and pay for your products, they will realize many benefits of bitcoin, and spread the words to others and get more people involved. And the more people start to provide bitcoin-only sales, the more popular bitcoin will become, demand rise, value increase

If merchants simply offering bitcoin as a payment option, this ripple effect might never happen, people will just ignore the bitcoin and pay with fiat, they simply don't have the motivation to get bitcoin at the first place

Congratulations, but we need more, an iconic product that everybody wants to buy. Ice-cream would be nice. Imagine it would be impossible to buy an ice-cream without bitcoin. That would make BTC really successful. Maybe it could be done in one town for one day for a start.

Not possibility, fantasy, no one is using bitcoin for legitimate purchases, just look at bitcoinstores sales figures. This correlates with my own business. Looks like paypal was right.

Yes, but that also is a positive.

My model (currently early development) will basically have two wallets kept separate.

Wallet A - just has bitcoin purchased via fiat.
Wallet B - just has bitcoin paid by customers. Wallet B gets sold for fiat.

Keeping them separate means transactions can't be tracked from buyer to supplier. It also ads some cost but if I'm smart I can sell high and buy low and come out ahead.

So doing business that only accepts bitcoin but keeps incoming and outgoing separate means more money moving through the exchanges and more money moving through the exchanges actually helps stabalize the price and stable price means more people are willing to risk using the currency for their on-line purchases which means a predictable stable increase in the value of bitcoin.

In my mind anyway, I'm not exactly mr. business whiz.

EDIT - what I was trying to say is it doesn't matter in my model because all incoming bitcoin will be sold for fiat anyway.
So suppliers who want to be paid in fiat will be paid in fiat and suppliers who want to be paid in bitcoin will have to be paid in bitcoin I purchased with fiat because I don't want the blockchain used to track my business.

This moving of coin in and out of the exchanges will help stabalize the cost of bitcoin to some degree because I'll be sellling at least once a month if not more often and probably buying at least once a once. As lots of business do that, it helps dampen the effects of people dumping on the exchanges.