To be honest, I quite enjoyed seeing grc.com again after so many years. It brought back a lot of memories.
Yeah, another revolutionary method for strengthening passwords that relies on the attacker behaving like the author wants him to behave (in this case: not using search targeted for padding.) Padding with a constant char to huge lengths? Gimme a break - this method only increases the search space by a (number of chars) * (max pad length) factor.
Is it paranoia to think that crackers could use a site like this to build password dictionaries? (Note: I'm not implying that's what's happening here)
No, not at all. No way I'm typing my passwords on some random web page.