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..so that even if someone took a copy of your harddrive onto their iPod and worked on it for ages, they'd never be able to read your personal files...

Ehh.. you should know better than this! Never say never when talking about code cracking! 128bit encryption was supposed to be unbreakable and can now be broken relatively easly if you have some resources. The only true form of encryption is quantum encoding. Everything else is beatable, its just a matter of time and money.
 
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