I've recently realized that Corsair Padlock 2 can be cracked (you can read my paper: http://www.exploit-db.com/papers/15424/ )
And i came with idea to reimplement it more securely and open the sources so everyone will be able to check security of such device.
I want to make custom encrypted flashdrive (probably) using Atmel AT89C5131 (or AT89C5132) while avoiding the security bugs of Corsair Padlock 2. AT89C5131 does have only 32kB of internal flash memory (enough to store certificates and passwords) but it can interface to some larger flash chip or even microSD cards so you can have very good encrypting card reader/writer which is able to store few GB too…
b00lean seems to have sufficient knowledge and hardware to implement this. actually he was able to get mass-storage working on his development board from Elbow project in minutes. all we need now is to add AES alghoritm, implement some way to enter encryption key and design custom USB stick shaped prototyping board…