There is technically no difference if you keep BTS as collateral or bitUSD or other bitAsset. As long as collateral asset can be easily converted into borrowed asset, this is fine. Any bitAsset can be easily converted into any other bitAsset either through a direct market or through forced settlement to BTS first.
This is actually a very nice idea. The first bitAsset should still be issued by somebody, who is long on BTS. Let's say, Alice issues 1st bitBTC backed by BTS and sells it to Bob, who is long on BTC. Now, Bob can lock his 1 bitBTC as collateral, issues 5000 bitUSD and sells them to Carol, who wants to keep her money in blockchain instead of bank account. Carol's 5000 bitUSD would be effectively backed by a 20000 USD worth of BTS, which Alice locked. Carol can settle her bitUSD for BTS any time. This way every bitAsset is properly backed and a risk of shorting is distributed between multiple people.
Actually, bitAssets is a pioneering experiment with a lot of unrealized potential. If it was re-iterated in a smart way, it could surely beat a shit out of centralized competitors in margin trading.