I agree that transaction volume = success.
Does appreciation imply that when merchants receive payment in Bitcoin, they opt to maintain the funds in Bitcoin rather than converting them back to their home currency? That also sounds like success to me.
Well I think in part the problem is that bitcoin (or whatever crypto-currency) could become different kinds of successes. Let's call these Paypal success (using them to make payments but not to store wealth), Gold success (making them to store wealth but not really to make payments), and Dollar success (both). One wouldn't say "paypal will really be a success once merchants stop pulling the money they receive in credit card payments back out into their bank accounts." Of the three, I think paypal success is the lowest hanging fruit. But cryptos may go nowhere. They could first achieve paypal or gold success on their way to dollar success, or they could achieve either paypal and gold success but not go further than that.
The advantage cryptos have relative to mastercard/western union/paypal/etc is that the cost of processing payments is faster, transactions settle much faster, and merchants don't have to secure the payment information of all their customers or face liability. Sellers also don't have to deal with fraud and chargebacks, although this is offset by the concern for consumers that if someone steals your private key, you cannot close your account and dispute the charges.
Until bitcoin values are equal or less volatile than the value of the dollar, or merchants are paying the bulk of their suppliers or employees in bitcoins, I imagine they will continue to convert any payments they receive right into dollars. The people who run retail businesses and the people who have the interest, resources, and risk tolerance to speculate on currency markets are largely non-overlapping groups.