My anonymous commentor is getting at a very interesting point. Why does SpaceX do their own engines when clearly better engines are available from Russia? The Russian engines have far better Isp, burn the same practical fuel mix, are available for known and probably reasonable amounts of money, and are known to work now (which takes a lot of schedule uncertainty out of SpaceX's plans).
Using Russian engines was Kistler's plan. Kistler spent five times as much money as SpaceX has without building a complete vehicle. Maybe it was their recovery system. Maybe it was their basing plan.
I suspect that using a Russian engine puts a big Chinese wall in the middle of the company, for both intellectual property and ITAR reasons. Enough of the vehicle design is tied to the engine design that what you end up with is a company that, to a noticeable extent, resells Russian launch services at the whim of international relations.
How big a deal can this be? The Atlas-V uses Russian engines, and is intended to be used by the military for sensitive launches. If Lockheed can do it, why not SpaceX?
According to Astronautix, Atlas V has launched 4 communication satellites, only one of which was a U.S. satellite, which was commercial. By comparison, Delta IV has launched 2 U.S. military commsats and a european commsat. My sense is that the U.S. military is averse to relying on a launcher using unsubstitutable components from a major overseas competitor, and funds the Atlas solely as a backup to the Delta.
I think SpaceX knows it will be dependent on launching U.S. military payloads, and knows it can't do that with Russian engines.
If SpaceX is sucessful, I expect an EELV, probably Atlas, to get cancelled by 2010. Delta will become the backup launcher, subsidized by the military and flying in very low numbers.
And seven years from now, I think the boost competition will not be United Space Alliance versus Ariane versus SpaceX. I think it will be SpaceX versus at least one Russian company (perhaps marketed by a western company e.g. SeaLaunch) versus the Chinese. SpaceX will get the U.S. military business by default. To win the international competition, SpaceX may need to figure out reuse.