i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.