Decent defense against keyloggers etc.: Do not let anyone compromise your machine. It boils down to this; even with "authenticated" hardware there's always a step that is not authenticated. As long as you don't let anyone tamper with your machine, you're safe.

And if you do think your hardware has been compromised, there are ways to attempt an offline recovery of data so that the attacker never knows you have decrypted your system and gotten the data out. Physically destroy the machine afterwards, to be sure.

University libraries in Finland have used similar DRM techniques for several years now. The system works on Adobe's eBooks and there's only a limited number (sometimes only one) of "copies" available of each book. This whole system has of course been initiated by publishers and Adobe, and I think the whole thing is a terrible waste of resources, and I suppose even many of the authors of the books would think the same, if somebody asked them. The system imposes artificial limitations on the data that are based solely on copyright legislation. Of course the system requires a version of Adobe Reader that's only available on Windows and Mac. Can't run it on wine even, since it has several layers of debugger/simulator detection (I once tried to take a screenshot of the program on Win98 just to be able to show to people what it looks like - the Reader hanged the computer completely and it only responded to hard reboot.)