First, that was the non-original version of Hushmail, and over a decade (of development of more capable browsers) has elapsed since the original. Second, the business model would then change to charging for email. Google does that for many services already; paid Google business apps accounts currently provide "no content for ads."
I'm not saying it's not possible (business-wise) as a product offering, I'm just saying there's not really any point to webmail at that point. You can pay Google to be an SMTP gateway and encrypted mail backup now, true, but there's no difference between that and any other email provider at that point, except maybe uptime. No web interface, no search, no spam filtering, no label filtering, no Google Now interaction. Those are all the reasons I like gmail, so I'm not sure about the point of it if those are gone. Just go client-side at that point; at least you'd be able to search your email. And if you're using an email client, you don't need (and probably don't want) google to provide content encryption.
As for the browser side of things, it seems like it would be much much better not to rely on google, but to write a browser extension that identifies the gmail textbox and runs some version of PGP using a private key in your OS/lastpass/whatever keychain. The main thing you'd want to do is somehow isolate the input textbox from the page so that keystrokes only go to the extension, and only the encrypted data goes into the page, preferably when the Send button is pressed.
If Google were to be technically capable of decrypting your email so they can show it to you in a browser, and you're a target for an investigation (a narrow one or an overly broad NSA one), why on earth would the court order/warrant not demand that they decrypt your email to show them, too?
All of these are good points. You make a strong argument that there might be little need for a web interface.
A few other thoughts, though:
- You could still do spam filtering, of course. If it scores highly as spam and the user trusts the spam filtering, it could be deleted or moved into a likely spam folder. (I'm assuming plaintext email is encrypted automatically right away.)
- If the encryption is handled on the client side, Google would NOT be technically capable of decrypting your mail. They would not be able to comply with a court order demanding they decrypt your mail. This is what the original version of Hushmail did, before they added the flawed later version that was exploited by FedGov in, if I recally properly, precisely the way you describe.
