No, I actually thought of AES256-CBC:
Wallet encryption uses AES-256-CBC to encrypt only the private keys that are held in a wallet. The keys are encrypted with a master key which is entirely random. This master key is then encrypted with AES-256-CBC with a key derived from the passphrase using SHA512 and OpenSSL's EVP_BytesToKey and a dynamic number of rounds determined by the speed of the machine which does the initial encryption (and is updated based on the speed of a computer which does a subsequent passphrase change).
https://en.bitcoin.it/wiki/Wallet_encryptionExactly what I said. AES is encryption. It's not applied "repeatedly". The password is HASHED repeatedly (in this case with SHA512)
PBKDF2 does exactly the same thing
http://en.wikipedia.org/wiki/PBKDF2The encryption can still be AES with PBKDF2
So it works like this.
User's password = password
Hash the password, lets say 100,000 times to slow brute force.
100,000 times: password = Hash (password) ..
Use the end result of that 100K hashes to encrypt with AES