Hey -- I lives in the Valley, and I resemble that remark! Just 'cos we ain't got yer sophistimacated, civilized Halifax ways, don't mean we isn't got smarts and stuff. Look at me -- I was smarted enuff not to marry my sister -- I knewed it would be bad fer da youngins -- I married me brother instead!
Yes -- obscured encryption is what you want, so that when the Man says "decrypt this", you run a command, and all the Man sees is a bunch of innocent images, or something. It might mean that you only have one byte of encrypted data per kilobyte of superfluous junk, but hey -- it would be worth it.
I think you misunderstand -- it is a CLOSED subnet -- four or five servers, with two or three users in a secure room. The ftp passwords never leave the secure environment -- no other machines are connected to it -- where exactly are spyware sniffers going to come from (OS loaded out of the box -- no connection with outside) -- even if there were sniffers, nothing can ever leave the subnet!!
I spend a lot of time on working on closed subnets -- ftp is v useful for systems when there's only one or two users with access -- and everything is done in a secure room. Do we really need to sledgehammer of ssh? Admittedly I didn't RTFA (on principle, you understand), so why should everyone be denied ftp when it is not dangerous to all?
I fully intend to write some bots before I croak, just so I can creep people out -- get it to send txt msgs, tweets, facebook status updates -- the lot. Maybe even sperad rumours that my demise was greatly exaggerated...