Are Ripple IOUs fungible? If you hold an IOU from a gateway for $1,000, there's a good chance
  you'll be able to pay that to nearly anyone at very close to face
  value. If you have an IOU from some random guy for $1,000, you may not
  be able to find any payment path to people you want to pay and no
  payment path to a gateway if you want to cash out.


Isnt that a huge flaw in the system? That the one $1,000 can has less value than the other $1,000, based on who the debtor is. The whole power of Bitcoin is that all coins have equal value, and to preserve that philosophy they will never allow tainted-coins. 

But with Ripple it looks like my wallet can show $1000, but based on the 'taint' its real value can be as low as $50.
That's just reality. IOUs will be valued differently depending on who you got them from.

You probably value $100 in cash higher than the fact that your friend Joe owes you $100. You can use the cash right away while you have to wait for Joe to pay you back or you could transfer that debt to some common friend of you and Joe's (a friend who is fine with Joe owing him $100).

Now compare it to having $100 in a bank account at your local bank (i.e your local bank owes you $100). You'll probably value that a bit higher than having Joe owe you $100 since it is easier to instantly transfer it to your friends that have accounts at the same bank.