First of all - I also don't "get" crypto currencies yet, the big issue to my mind with bitcoin seems to be that its a finite resource (I've seen estimates of when the last coin will be mined), this suggests that there will come a day when the currency simply stops.
That being said, lets assume it does actually work over an extended period and deal purely with the issue of refunds. I think the suggestion of converting to a reference currency is the only practical approach, certainly it used to be the case that you could only submit a credit card settlement file once per day to avoid people gaming the exchange rate of foreign currency transactions.
Lets assume for a second that you have to refund the amount of the currency paid in its original form - this would create a very easy way to game the system. I take my bitcoins and buy something with fairly static value and low transaction costs (golds probably not a good example these days but for the sake of argument lets use that). I then wait. if the value of bitcoins rises then I demand a refund, if it falls I sell the gold in another currency.
Suppose I then buy £100 of this commodity every day (in BC equiv currency) on a rolling 30 day cycle with one purchase and one refund every day - at this point I profit from any rises in the currency but don't take losses from any falls.
The only way you'd get around this is if you required the merchants to hold the BC in that form for the refund period - but then they are in the position of not knowing the effective price at the point of sale.
Hence the need to convert to reference currency - which incidentally I believe is also a tax requirement (i.e. profit/loss must be reported in £GBP)