I like the idea of using a crypto lib, but it will probably take some thought and experimentation to figure out what will fit into roughly a ~1hr exercise. That is always the hard part - not picking something too large.
What I am weary of is a single exercise that isn't easy to break up. Or one that even if you break it up, each exercise isn't entertaining or educational enough to stand on its own.
I also prefer having exercises (at least for this course) that can be completed in someones spare time - say in an afternoon or evening - and if an exercise takes me 1hr to code in a screencast, chances are it will take someone newer to the language longer and that doesn't account for time learning about new std libraries, googling questions, etc. In short, a 1hr exercise for me might be a 3+ hour exercise for some students.