For Less Wrong karma to eventually be worth something as part of a reputational economy, there is no way around allowing wealth transfers between karma and real world currency/services.

I'm fine with LW karma not being worth something as part of a reputational economy. In fact, I'd prefer it if we didn't total users' karma at all and just kept track of it per post, as a measure of how good an individual post is. The temptation is too strong to think of a user's total karma as actually meaning something ("reputational economy"), when there are all sorts of confounding factors like the number of posts made, how new someone is, how wittily they write, and how much people agree or disagree with their posts.

I second the idea that a LW prediction market should use real money because it's actually valuable.