The misunderstanding I see is that Kyrne has written a beautiful extension that works great for messaging, but has added a feature (encryption) he feels very strongly about yet many of potential users are not interested in or even find it onerous.
@Kyrne, you have to understand that any extra effort means that a certain percentage of users won't use this feature on my site or even will just go to another easier to use forum. It just is so statistically. No amount of explaining that setting up yet another password on a site you just have registered at isn't a problem for you will change it for them. It's like if you said you don't like ice cream and I tried to explain you why you should. It doesn't work that way, explanations don't change what you like or not.
It's your extension so you of course are entitled to do whatever you want with it, but I think you are limiting its usefulness for others. The best way would be if Shout was set up automatically using account password and ready to use with zero extra action from user, and afterwards if the user wants he could change the password for Shout.
Or just have no encryption as an option, but it seems that cryptography is your thing.