I don't realistically expect my coins to be used much for trade - it's rather infeasible with the premium I must charge to continue to make them. Anything can be compromised or counterfeited given enough resources or ingenuity. The only thing I can realistically promise is that I've mailed out only honest coins. That said, I'd expect competition long before I'd expect counterfeiting - it is far more rational economically to make legit physical bitcoins than fake ones.
The argument would be, why invest all the resources to make fake 1BTC coins for a short run that won't be sustainable when the market is willing to pay a good percentage of 1BTC in the form of a markup for a legit coin in the long run?
But surely the end goal of casascius coins is to become a physically form of bitcoins that are tradeable without any internet access? Otherwise wouldn't they just forever be a novelty item?
And as I see it the only way to truly validate a current casascius coin is to destroy it by pulling out the private key (as someone could have accessed the private key via a scanner or something, or coin could be fake, especially if someone figures out how to get the hologram off without making a mess)?
And obviously having a coin that is destroyed upon every transaction doesn't work in the real world.
With coins permanently fixed to an address you could continue to reuse the coin without destroying it.
To combat counterfeiting I have two ideas:
1) Use difficult-to-fake markings (as with all other physical monies)
2) You could have generations of coins. And you bring out a new generation with different markings every 10 years or so. When a new generation was released coin owners would have the option to send in their coins and have them re-minted (for a fee of course). You could destroy their old coin and mint a new generation coin with the same address.
You could record each coin address and generation in a database. So if someone handed me a 2nd generation coin I could look it up in the database, and find out that actually this coin has already been minted in the 3rd generation, so I'd know it is fake.
If there was no counterfeiting users will be happy to continue to using old generation coins without much difficulty, but if counterfeiting became prolific owners will be eager to re-mint their coins as soon as a new generation was released.
As for the additional cost of producing coins I don't see this as a problem as there would simply be two values. A casascius BTC would have a slightly higher value than a digital BTC. In fact this additional cost only make sense if the coins cannot be converted directly back to digital, and would need to be "exchanged" instead.