Will forks and alternative block chains cause hyper-inflation of decentralized digital money? Great effort has been put into Bitcoin's concept of money supply and that there will never be more than 21 million units.

However, it's relatively easy to fork it and create alternate block chains. SolidCoin, IXCoin, IOCoin etc are much less worth, but they can easily be traded against Bitcoin. Does this increase the over-all supply of Bitcoin-like money to well beyond 21 million units? Some believe yes, and that this is one reason already for the recent price drop.

Also, the concept of open and decentralized P2P money is still young. Chances are that a lot of other such currencies will pop up in time. Is there a risk that Bitcoin will be thwarted by an inflation of other currencies, rendering it and all other open, "free", decentralized money worthless and useless?

EDIT: One thing to consider in this context is that the number of traditional currencies will always be limited as there are only so many nation states on this planet (and they are consolidating, e.g. Euro), but the number of decentralized digital currencies is potentially unlimited.
It depends entirely how much those alternate block-chains get utilized. In the recent examples of ixcoin and i0coin, a small portion of btc miners and users switched over, sold their stash and went right back to bitcoin. It's essentially a case of network effect - whichever block-chain has the most users will be the most attractive to new users, and those new users themselves contribute to that effect. Bitcoin is by no means beyond the "tipping point" where forks can no longer threaten it, but short of a fork with some superior feature or another it remains the preferred fork and probably will for some time. Even namecoin hasn't touched bitcoin's user-base much despite having a definitive use built into the protocol.