That's a pretty far-out concept...but very interesting, and a very nice website. It looks like they already plan to use the bitcoin blockchain, though:
"Bitnation is a Distributed Organisation incorporated on the Bitcoin blockchain"
So I imagine it'd be hard to get them to jump ship now. Unless of course Bitcoin ultimately implodes, which is looking more and more like a possibility lately...
But yea, a competing BitUnion/BitSociety/BitCountry/BitPeople would be awesome...lol too bad they already took the BitNation name.
BitPolity? BitRepublic? BitDemocracy?