I love it how everybody brainstorms on security...
But, seriously. Do you think you are much smarter than Gavin and Jeff and all the others?!
Here are my 0.02 BTC on this:
Flaw #1: "Let the user decide the level of security"... Users, and I know you are familiar with the term "DAU", want maximum comfort and don't care about security. As evidenced by the Mt. Gox hack apparently "123456", your birthday or any 5-6 character dictionary password are enough to secure $1000+. The first request would be an option to "store" the missing characters in the wallet.
Flaw #2: Forcing people to use a new private key after every transaction is asking for trouble. I regularly use my wallet on three different computers and I am very happy that my day-to-day transfers are done from one account (apart from the safely stored "savings" account). If I would have to sync all of them all of the time I would go crazy.
Flaw #3: If you ever lose those missing characters you will not ever be able to recover your funds! Unlike with a bank that can issue new passwords and TANs, you are effectively screwed. Admitted, that would also happen with a not backed-up wallet, but now you have two things to worry about: Your wallet and the "printout" (hardcopy or not). I doubt that most people have fire-proof safes to store valuable paper like this.
Let's face it: "More security" can only be accomplished by educating users. It's already possible to have a safe wallet, even though it is not encrypted and password-protected. And it will also be possible to be unsafe once everything is super-safe and tenfold-encrypted. People will just keep using "secret" as their password!
Apart from that: Germans FDG!! (für den Gewinn)