I like it, very clever. But doesn't the block chain get unfeasibly large at some point, especially if it gets "overloaded" will all kinds of things?

I haven't taken the time to fully understand it, but I gather that there are proposed ways to trim the block chain's history. For clients that don't need a long history, I imagine they could just download a snapshot for, say, Jan. 1, 2013, that simply listed all the bitcoins and their owners at the time, rather than all the transactions that happened before that point.