Their line of reasoning was that you could just as easily host encrypted blobs on IPFS and be done with it. That somewhat appeals to me, encryption of content seems orthogonal to hosting it. It feels like the Unix dogma 'do one thing and do it well'.
Encryption isn't slow, it wouldn't hurt performance or anything like that. Plus, if everything's encrypted, it doesn't attract attention to the people who appear to have something to hide.
The model I have in mind would be what mega.co.nz does: store opaque ciphertexts, and distribute links containing the keys to said ciphertexts. So instead of a link to someproto://hash/ you'd link to someproto:://hash/decryptionkey/. And your IPS/Dat/whatever client would handle decryption for you.