The fooferall around AIM's recent change in terms of service reminds me how the cypherpunks movement has failed. Email is still not encrypted.
It's been at least twelve years since the gauntlet was thrown down. Untrusted networks and servers gives individuals the need to protect their privacy. Cryptography gives us the means. And yet despite the efforts of projects like PGP/GPG email is still unencrypted. Ashcroft knows who all is reading your email.
The problem is the cryptonerds have always focussed too hard on getting things exactly correct at the expense of usability. A big part of the problem is key exchange. PGP deliberately exposes the details of key exchange. This protects you against man in the middle attacks, but at the cost of no one ever using PGP. Contrast to Trillian or Skype which gloss over key exchange niceties. You may be vulnerable to a man in the middle attack, but on the other hand at least you're using some crypto.
I think the thing that will force an email crypto solution is spam. Authenticated senders are strong spam protection. Once you have the infrastructure for authentication the encryption is easy. But that infrastructure is going to be too centralized for my tastes.