You are incorrect. FIPS validated products cannot use the password for key generation. Instead, they must use a random number generator to create the AES key (eg 256-bit key). They password is used to gain access to the key. So a short password can be used, yet you still get 256 bit encryption. As long as brute force password protection counter is also implemented in hardware and cannot be rolled back, you do not need very long passwords (eg. set a 3 try limit). Also, you should encrypt the random AES key with a SHA-256 hash of the password, so that the key isn't stored in the clear anywhere.

IronKey D200 and S200 models are validated to the much more demanding FIPS 140-2 Level 3. The products that are the subject of this hack are validated to Level 2. They are all in fact manufactured by SanDisk. Previous authors are correct, their architecture has serious design flaws. They are relying on the host PC to do password verification, and essentially using a static code to tell the device to unlock. Basically it's a back door to all of those affected SanDisk, Kingston and Verbatim devices. I will be posting an FAQ later today on the https://www.ironkey.com/ website describing the flaws and how IronKey's architecture does not have these issues. IronKey validates all passwords in hardware. We have password replay prevention and encrypted USB command channels. We also use a hash of the password to decrypt the data AES key, so it's cryptographically impossible to unlock an IronKey without the password. Finally, IronKeys store encryption keys and brute force counters in a hardened CryptoChip. The SanDisk, Kingston and Verbatim products store them in Flash memory, which isn't even part of their FIPS 140-2 security policy. Dave

IronKey does encryption in hardware on the device. All keys are generated on the device and are not-exportable from the device. No software or drivers need to be installed on your computer.