The gold standard has an issue, that the money supply only grows with the amount of gold you dig out of the ground. The problem is that the gold dug up out of the ground nowadays is proportional a huge amount less than the growth in all the items produced in the world, leading to deflation, which is bad for several reasons, mostly cause it promotes the hoarding of money and gold, because as you keep the said money/gold it becomes worth more over time. Similar to the current crisis, this hoarding will only promote more hoarding, which reduces spending (yes the price will drop with the decrease in money, but will have a considerable lag so will reduce the actual amount of money people hold) so we'll be in the poo returning to the gold standard.
The only way you can avoid that is to use paper money, as it allows flexiblity to increase (and decrease too, to a lesser extent) the money supply.
Eccomnics 101, money supply determines the price level if the quanity of goods, and velocity of money stays the same (MV=PQ)
The issue at the moment is that basically the velocity of money has decreased, because bankers and businesses are scared to invest. this causes deflation. The thing that needs to be done to get the eccomny moving again is to either increase the velocity of money, hard because unless you control the banks (which in Britain does begs many questions why they don't force the banks to lend) they don't want to invest in such uncertain climates, so the only other option you have left is to increase the money supply, which the banks should use to invest, this will get things moving again, as they're more willing to invest. Yes there is a big arguement as to why we should keep fuelling the banks with money, the easy solution really is to attach to such bailing outs the condition of regulations to stop this sort of mess happening again.
To go back a bit, I don't see where gold is better, aside from being used for high end technologies, it's actually pretty useless itself. It's just durable and desirable enough to be used as a substitute to cash historically without really having any inherent wealth, certainly not to the price it's currently fetching.