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My 3 cents....
The argument of spam and illegal activities discussions seems to have weight still; especially if someone ends up with a log of a conversation that was encrypted but was discussing putting a nuke in a building somewhere, you'd be in trouble no matter how many layers of disclaiming you put on your MUD. IANAL, but just because I have a sign on the front door of my house saying "discussions of illegal activity will not be initiated or condoned by the owner of this house" doesn't mean I don't get some fun in a few hot seats if people discussed shooting up a building in my house, then did it.
That being said, whoever created this program should probably get HIRED. Having no experience with encryption, I don't know what that would entail, but ####, they wrote a networked encryption communications program(or plugin, whichever)?! Who cares about beating them; I want to put them to work.
The philosophical question of whether you allow communication over a public channel to be intelligible to the rest of the players seems to be a choice issue; if communication is so relevant on your MUD that it should always be understandable to the player base, then you tell them to stop. If it's not, you tell them to give you the decryption algorithm and simply log it. Which method is BETTER seems to be subjective, and related less to presonal principle (control freaks vs whatever name-calling Yui received) and more towards the game's objectives.
-Visk
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