I understand why people call for this, but it's really a very narrow window of "security concern" where that's a valid feature.
Much better would be an open API, and an open source client, which does the encryption, preferably not even technically affiliated with the cloud provider.
The author of that code is the FreeBSD security officer. He is also the author of my favorite comeback ever on Hacker News: http://news.ycombinator.com/item?id=35079
(Or navigate up to http://news.ycombinator.com/item?id=35068 and get some context. cperciva really is impressive.)
During installation, Dropbox asks the OS for an encrypted read/write view of "/home/user/Dropbox". The OS confirms this with the user. The user sets up the key/password for that encryption. Done.
If Dropbox is compelled in future to try and gain access to the unencrypted view of that same folder, it would have to ask the OS permission, and the OS would ask the user.
Dropbox could also ask for an unencrypted view on the initial installation, but the user should still be allowed to specify that the view it gets is of the encrypted versions of files only. This would be entirely transparent. Dropbox would have no idea if it's getting the full view or the encrypted view.