Is a one time use ugly hash really a big deal?
I agree - it's not.
My experience of it -
A few months ago I downloaded the wallet and tried to transfer some funds from bter - I was caught in the catch 22, no funds to register, no way to get funds until I registered. That was a real barrier.
Recently I downloaded again - this time I can transfer to the ugly hash from bter. No problem. Just need to make sure exchanges will transfer to ugly hashes, and worry about bigger issues.
In the short term, most new users are going to be coming from a Bitcoin background and will be perfectly at ease with an ugly hash. The id will come as a pleasant surprise.
(All that said, POW registration is elegant, but over-engineered for what is required)