What I get a laugh out of is the quotes by many people stating that since it is hardware encryption, it is much more secure than software encryption. It didn't take long for the hardware-based security features of X-Box to be hacked. The problem is that since it is hardware, people will be able to slowly conduct a multitude of tests on the chip, changing the voltage, temperature, etc., until they find out just what it does and how. Once that is done, it won't take much to compromise the whole system.

I would strongly suggest any proponents of this system read Bruce Schneier's book, Secrets and Lies.