Folks, I'm glad you're alive.

I kinda wrote you off (but had a google alert configured to watch for megareload.se stuff anyway)

Glad the "incentive" thing is coming back (off course, I will only use it to earn bitcoins on legal files uh-huh )

Things I think you need:

Folder-based uploading (not as in "upload this folder" but as in "upload all files in this folder"). This will make uploading split files much easier. Of course, then you will need some clever way to reuse password for a folder's content.
I mean, it's fine and dandy to encrypt them all with same pw, I reckon, but I guess entering the password for every-single-f[bleep]ing file a gazillion of times will get on people's nerves. I suggest you add some kind of "reuse password from previous download" functionality to the applet (you can store key material on user's box so as not to compromise your security model... or keep it in memory... whatever. You're the code people, not me )

And you definitely need to significantly reduce storage time for free files that are unpopular (so as to force people to host totally legal popular files)

Also, you need open-source browser plugin a-la cryptocat.

I mean, sepukku is fine and dandy, but I think there's a whole body of thought that suggests that as far as crypto "reliability" goes it's "js crypto" < "applets" <"plugins"

Cryptocat does it the plugin way, you should too*

*I even promise not to have my BF excise advertising code out of the open-source plugin (then again, if boyfriends excising ads out of your plugin becomes an issue, you can make the plugin so that it only works for paid members)