But ever notice how many times you've told people on HN not to use MD5/SHA1 for passwords? And those are the clueful ones - the idiots will store plaintext passwords and get their database compromised by the first attacker who's heard of SQL injection.
If everyone copy-pasted some Javascript from Zed (not a crypto/security guru, but at least a competent coder), it would be a significant improvement. Sure, it's not perfect, and the centralization of login credentials is not a good thing security-wise, but many people reuse passwords anyway, and it's not like OAuth and the like is any better. Authentication-as-a-service is, I think, likely to be a net win. [EDIT: So I do see the value here.]
Zed's implementation, Javascript crypto and all, even has the (potential - didn't check the code) advantage that the webapp servers don't need to trust the authentication server, provided they host the Javascript. I'm not convinced that this is enough justification for doing crypto in Javascript, but it's not the usual "host-proof" idiocy.