Possibilities for physical transactions
This is kind of like I guess a Feathercoin credit card so to speak. You would have a memory device such as a USB, which would have your portable wallet.dat file. This would be different from the .dat file saved on your computer, since you obviously don't want to be taking your entire stash everywhere. It would be even simpler if the Feathercoin client had a portable wallet feature that took care of transferring a certain amount of coins into your portable wallet, and then exported it as pwallet.dat for example.
In the merchant side, they would have a program with an integrated Feathercoin wallet with a fully downloaded blockchain. When you insert said memory device, it takes the wallet.dat file, and loads it on the interface so that you can access the wallet. It then does an automated transfer from the portable wallet, to a preset merchant address, with the amount input to be transferred. After the transaction, you take out your memory device and program refreshes its pwallet.dat so that your memory is wiped clean.
Of course there are security risks, such as data remaining on the merchant computer or an autorun virus on the USB stick, but this is just something to build upon.
Another suggestion would be instead of using a physical memory device, maybe the client can export the information with a QR code or something that can be scanned and then you can enter a pin number of sorts.
Ie automative export of a specific private key, so ownership is transfered "off network", between wallets.
1. advantage : It is easily implemented
2. disavantage: only export specific keys with specific amounts that are in them.