Hi,
not sure if you already noticed, but I and my friends are actively working on bitcoin hardware wallet. This should be pocket size device with something like 256kB flash and 80 MHz CPU, talking with the computer over USB. User will prepare transaction on the machine, send it to the device, device shows target address on the display and user confirms it by pressing the button.
We're trying to make bitcoin payments safe even on hacked computer. For this reason we're also implementing SPV so device don't need to trust computer with any kind of information. The biggest existing problem is that user cannot be sure that the address displayed on computer screen is correct and he's confirming valid address.
I don't have any solution for this problem yet. I just appreciate an activity in payment protocol area, because it can (with some care) solve this problem and my appeal si to keep all this simple. I'd be very happy with simple payment protocol which can be implemented even on devices like I'm working on, so device with few widely used certificates stored in the memory will be able to display origin of the invoice and confirm its validity.
slush