My security dilemma

I've gotten started working on that key drive encryption utility that I was talking about earlier, but now I have run into an interesting design problem. One of the things that I wanted to do was to create a way for someone to "register" their computer so that they could make the encryption work without manually entering the password. What I was thinking about doing for that is creating a scheme wherein the full path to the user's home folder on their personal PC is turned into a password for an encryption key, then that is used to encrypt a file in the same folder as the utility that contains a plaintext copy of their password.

Other than the usual exploits against someone's personal PC, I can't really see much at risk with this right now. Maybe I'm missing something, which is why I am a little paranoid about it right now. Part of work description is the security angle, and I am just a little antsy for some reason, I guess.

On a different note, I got a XBox 360 last night along with a few games. I got Kameo, Call of Duty 2 and 99 Nights. The latter is by far my favorite so far. In fact, I'd love to have the opportunity to take some of the fiction I've been writing and turn that into a game similar to that.

I might also download the XNA toolkit and play around with that. It's a C# toolkit for writing Windows and XBox 360 games. Sounds interesting, and it's supposed to make game development a lot easier.