If I sent Bitcoins to family in Europe, would they be able to convert it to physical cash? I am interested in buying bitcoins to easily and quickly send money to family in Bulgaria. Would they have to convert it to euros and only be able to make online purchases? Or is there some way they could get physical cash from converting their bitcoins?
When bitcoins are converted to local currency (EUR, USD, BGN, etc.) and you want to take control of them yourself (as opposed to it being stored as that currency in the exchange you're using), they typically are sent to your bank account. From there, you could easily withdraw the money as cash. There's nothing that would make them have euros but only be able to spend them online.

One place to trade the bitcoins for various local currencies is LocalBitcoins. You might also see if Mt.Gox has options to transfer to bank accounts in Bulgaria.

You and/or your family should research the available options, and how they compare to more traditional international money transfers and choose what works for you. While the bitcoin transaction itself has only a tiny fee, buying and selling might be more trouble and expense than it's worth.