Re: Not quite as strong
This is true. The repeated block issue hadn't occured to me either -- and thats something that will never go away since its the very thing that makes the files useful with rsync. Currently, there is a disclaimer at the bottom of the manpage, however I'll add it to the homepage in the description of murk's operation.
My only idea for getting round the weaknesses, in resetting the encryption, is to have a different key for each block. What I haven't worked out is how to generate these keys in a predicable way so that different generations of a file can be efficiently rsynced. By predicable, I mean a block of data always gets encrypted with the same key.
However, it is interesting you mention the importance of the iv being reset to its original value. Would there be any mileage in resetting the iv to, say, a checksum or digest of the plain text block? Indentical blocks would encrypt identically but similar blocks would give away less about their contents.
Not quite as strong
You may have already considered this, but "resetting" the encryption I assume means returning to the IV generated from the passphrase. If you do this every 8k for example, you provide any attacker with a large set of similarly produced ciphertexts. In addition, every 8k block that is equal will encrypt to the same value allowing the attacker to make inferences about the contents of the file from the prevalence of particular encrypted results.
I'm not convinced either of these issues is a particularly big deal in this case, but it might be worth noting somewhere prominent that block ciphers are chained for these exact reasons, and that the user should understand that the resulting encrypted file is not as strong as one produced normally. I think it's more than fair to say (assuming you're using a decent cipher :) that it is still plenty strong enough for regular data, although I'd be worried about anything that someone might take a few months to try and break.
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