And again, I am not doubting your competence. What I am saying is that we are all humans. Google might have hired the best computer scientists around the world but they still got hacked. It might even be a problem with the programming language you are using (rmb mass assignment on ROR?)
"We offer people an off-site backup at the cost of trusting a third party with their password."
Yes, this is my main point. People have to learn that they shouldn't be giving out passwords to just about anybody.
I think this guy in the comments here (http://blog.geeksphere.net/2012/09/27/response-to-dropmyemai...) made a pretty good point. Maybe you might want to answer his doubts there?