I was mislead slightly about the Lao Kip: you do get wads of cash on conversion, but it's not as bad as the Myanmar Kyat. The biggest bill in Myanmar (1000 Kyat) is worth $0.80US, the biggest bill in Laos (20,000 Kip) is worth $1.86US. [rates were in December 2005.]
You may notice bills in the picture above that look suspiciously like U.S. dollars and Thai baht. I put them in because both are accepted almost universally at very reasonable exchange rates. Unlike Myanmar, currency conversion is done by the state bank at the going rate, so you don't need to go to black market money changers to get a reasonable exchange rate. The smallest bill I've seen so far is 500 kip, but that seems to be rare and I don't think there are any coins.