I'm wondering why this theft "undermines the whole bitcoin project". There have been much larger thefts of dollars, did they undermine the whole dollar project? If you look around in the forum, you will see that there has already been a very lengthy discussion on the topic of securing one's bitcoin wallet against theft, and I'm not sure more details about allinvain's story are really going to add to what we already know. It would be interesting to get the whole story, but the bitcoin project doesn't hinge on this in any way.
Is bitcoin the currency of the future or is it the exclusive domain of geeks? If it is going to be taken seriously, then we have to be concerned about a carefree "serves them right" attitude to theft. When hard currency is stolen a lot of serious people get involved in solving the crime and recovering the money. If bitcoin is going to be generally adopted then some thought has to be given to the protection from criminals of unsophisticated buyers. It is not the theft itself that threatens the bitcoin project, it is the reaction to it.
I appreciate the advice and information that is available in the forum but it should be easier for newbies to find and to separate the tech issues from practical advice. Finding and navigating forums is not easy for newbies. Do the traders have a link on their sites to a newbie security handbook? They should. Can the traders agree on the contents of it? Who should write such a book? We all should, perhaps a Bitcoin users security wiki?
Is this it, generally agreed upon?
https://en.bitcoin.it/wiki/Wallet_Security_Dos_and_Don'ts_(Windows)