> Your secret sauce, if I understand it correctly, is open sourcing the client side code and providing some mechanisms to assure end users that what they are executing matches the publically published code.

Yes, the js client is fully intended to work exactly this way.

> That makes sense to me, but I don't see why you wouldn't go one step further and store the secret key in the browser plug-in. Is it an multiple-installation issue?

There are a few issues here.

1. The first is the general crypto principle: minimize your TCB. I want the key to have to touch as few places as possible. For this reason, I have plans on moving the keys from the server to a clients machine(s). Doing so, however, involves a lot more problems including: NAT and the lack of a fallback. In the future, when I have more time to work on these details, I want to try and make that an option for people.

2. Another problem with placing the key in the browser is as you say: it allows anyone who is able to access the browser to access your key (including malware and other users).

3. Lastly, where would this key come from (remember rule #1: the server never has access to an unencrypted key)? If it is generated on the local machine that would then mean that you have no way of distributing it to your other machines (or at least not in ways that your grandmother will be able to do). Even if there were some super snazzy interface, it would be prone to attack as well.