+1

I also like the idea of offering insurance. The problem I see immediately with the insurance idea though is that no one will want to pay for insurance from someone untrusted. We need a sort of Misean regression theorem for trust...

We need transaction insurance.  Like I said before the party that isn't getting the bitcoins is the only side that needs insurance. It is definitely financially doable.

The best I can think of is a website with a list of all the Bitcoin organizations and everyone casts a vote on their experience with them.  Easy, simple, effective.

true that, the first major ewallet/bitcoin bank that comes out with real auditing from 3rd party security auditors, transparent policies, and insurance on balances will have my business. Add mobile banking and instant transfers to any other member of the bank and they'll be off to the races.

It's cash. You can't regulate cash. That's what makes bitcoin useful. I think people should stop trying to treat bitcoin as something that it is not. When you send cash across the web you better be willing to take the loss if the other party doesn't honor their obligation. This should severely restrict who you do business with. As Matonis has commented in several places, bitcoin is likely better suited for hawala purposes. Online merchants must make themselves highly transparent if they wish to attract cash-paying customers.

Better yet. Have technological means in place so that a 3rd party audit will not even be necessary any more!! (as e.g. discussed in this topic: https://bt.irlbtc.com/view/34118)

This is what we're working on now.

But trust is a harder problem.  Yelp doesn't improve the trust of brick and mortar stores, the bricks and the mortar do that.  The problem with web of trust is that you must understand what you're trusting.  With Public Key Infrastructure (pki) the web of trust is only Identity.  That is you can 'trust' that the key used to sign one document is indeed the key associated with a particular public key or the same key used to sign a different document, and to the degree that others have also signed the public key, they assert that the person is who he said he is.  This is not the same as saying that the person wouldn't steal from you.

As ebay has proven online reputation systems are difficult to build.  It's always easy to build up a lot of fake reputation, simply to do one scam after which you don't care if you get a single bad review.  We are working on designing a system that is weighted so that it takes many successful transactions to build reputation, but each bad transaction makes a huge negative impact.  We are optimistic that we have a good solution, but we still have a fair amount of work to do before it's ready for prime time.

Meanwhile use bitcoinlocator to trade in bitcoins face to face where trust and identity are much easier to deal with.

I instantly fell in love with your title!

My take on that is that we should build trust in the Bitcoin itself and - at the same time - promote healthy distrust in services keeping wallets online.

I had, and still have, full confidence in Bitcoin, with this crash and the next 20 to come (can't say anything about the 21st one!).

I think that giving Mathew what he wants and letting him audit Bitcoin services and give his UABB seal of approval would greatly increase confidence in bitcoin businesses. The problem is that every 15 year old is setting up a business today without thinking about what happens if things take the wrong turn (no offence, BitMan, I totally support you and your projects!).

An entity like the UABB is something that comes out of trust that the Bitcoin community gives to the auditing entity, he seems a reliable guy that knows his shit, and he can take care of validating businesses and making sure they're not spoofed or run by someone who cannot afford to make a wrong turn...
And it doesn't need to be run on donations, every business that wants to get the seal of approval from the UABB will have to pay a sum that the UABB will define in advance ($100-$500 seems reasonable) that will cover the cost of the background check.

Bitcoin is safe, the problem is problematic businesses.