Litecoin doesn't help. It modified the normal scrypt behavior for inexplicable reasons to use only a very tiny amount of memory compared to the scrypt paper recommendations. It's quite easy to throw 128k of sram on a chip and scream out one cycle/hash.  You'd get an even bigger speedup over GPUs and CPUs than you get from Bitcoin.

As others have pointed out, in GPU land AMD was really the only game in town. The situation with bitcoin fpgas and asics appears to be more diverse. Moreover, without the public using asics an attacker could get a big speedup.

I've seen some POW ideas that I find intriguing for other reasons— like amiller's idea of using fast random access to the txout set as proof of ability to rapidly process Bitcoin transactions— but I've not seen anything that prevents people with custom hardware from getting a substantial advantage over the public— except by getting specialized hardware into the hands of the public.

If Bitcion itself is made illegal (which seems like far out scaremongering to me, but whatever) then no amount of technical mumbo-jumbo can help it. People like to compare the prospects of outlawing Bitcoin to the unsuccessful drug war or to preventing the illicit distribution of copyrighted goods... but the comparison is not fitting: An unlawful drug still gets you just as high— even if your upstanding friends won't touch it— an illicitly copied movie still makes you laugh. But a money like thing derives its value from other people's willingness to accept it and even underground arms dealers need to eat and pay the rent, so even outlaws have little use for an outlaw currency.  For Bitcoin there is a double whammy: Bitcoin isn't secure if used by only a small niche, resistance to overpowering requires widespread usage.