ShobhRAJ I absolutely love the idea!! Saves so much hassle as I trust LG way more than exchanges... cough cough Mt.Gox. As other users have said it will save us from paying a withdrawal fee on LG just to pay another fee at the exchange site (for exchanging to fiat) , and I would much rather give LG that money in fee's to improve the site etc.
I also completely agree with Thugstream that an escrow service is needed as while most people on LG (at least in VIP land) are trustworthy I'm not stupid enough to say everyone on the site is.
Also like DunDun idea to accept paypal as that is what I use to buy/sell btc. I personally don't know any other way that is as fast for transactions (western union would mean driving there hoping they are open and just a whole big hassle, same for bank transfers those could take weeks, but paypal is instant.