You’re analyzing it as a simple matter of arbitrage. But Watto never explains why Republic credits are worthless – perhaps it’s a matter of law.
Well he says they’re worthless, but in any case, finding a black market dealer or smuggler (maybe in Mos Eisley) to accept them would still be far, far more intelligent than putting a six year old in a formula one Racecar and entering him in a race where bystanders shoot at the participants and racers are allowed (perhaps encouraged) to murder other racers if they can get away with it.
For fuck sake, if “Jedi reflexes” are enough reason for the moppet to win, Obi Wan or Qui Gon could have raced.
In any case, the credits are worth enough to buy a starship what amounts to a day’s drive away. *Someone *will be willing to take them. In fact, they could legally book passage with some ship owner, who then could spend the money when they get to Coruscant.
It’s just stupid any way you slice it.