I doubt most merchants would want a second machine just for Bitcoin. Why spend $250 for another machine when you could just have Bitcoin capability on your cell phone for free?
It needs to be integrated or it will not be used. I understand the difficulties in doing so. Someone should be able to come up with something.
Due to the strict device signing used by credit card companies I really doubt this could happen. They don't want to help bitcoin along at all.
If you can use a smartphone POS solution that is great, and I think many merchants will go that route. But the more choices the better, and a machine like this one would pay for itself in one year with $400 a month in bitcoin transactions instead of credit card. Clearly someone who does little volume won't use this but an established store with real volume would find it of value. It could be more locked down then a smartphone application.