Western Union is roughly in the same position now as Blockbuster was in 10 years ago.
Exactly. It isn't that blockbuster couldn't rent a movie at a profit, but that they had to get a lot of customers through the door so that little bit of profit per-movie multiplied many times was sufficient to pay the lease on the retail space, the staff, utilities, etc.
Western Union's model is tied to a two-step process by one company ... Western Union receives money in one location and pays out that money (less fee and conversion costs) to someone in another location. Bitcoin obliterates that model as there are now to independent actions that occur. One party buys bitcoins in one location. A different party sells bitcoins in some other location. This means there is no reliance on a trusted party in the middle.
This eliminates all the hawalders as well. Well, not eliminates, it simply allows them to work independently. They simply become bitcoin exchangers. It is much easier for them to not need to deal with both sides of a money transfer.
Since money transfer is a business with an 8% to 20% vig (depending on where from and where to), there will be a lot of people who will welcome Bitcoin's arrival in this space.
What's with the government and hating anything which can help them succeed? 
