My firm handed out tens of thousands of devices like these - the Kingston DTE - about three years ago. Everything is encrypted and 10 failed attempts at the password re-formats the drive. We are required to use if for managing all client- and firm-related data. I don't know if it's physically secure (potted with epoxy), but the encryption should be as good on the bare chip as it is through the USB port.

I suppose throwing super-computer-class processing power at breaking the 256-bit AES hardware-based encryption is a possibility, but I'm not too worried