I imagine escrow being done by the likes of Airbnb, in the case of the service. It won't be error free, but should stop the absolute frauds. In those cases, the escrow service is already paid for: it's the market that facilitated the transaction.

As for the money being kept in escrow, that is the definition of escrow. The alternative is the scenario of credit card payment processors, which keep the money for a period, and retain a fixed percentage of sales turnover, as a guarantee for refunds. From the merchant perspective, the average payment delay should be shorter using bitcoin than it is with credit cards.