That spec seems pretty nice (if rough) and I think I understand what you're trying to do. But, I must agree with @vkou; like I said earlier, it does not solve t

That spec seems pretty nice (if rough) and I think I understand what you're trying to do. But, I must agree with @vkou; like I said earlier, it does not solve the keylogger problem. If there's a keylogger on the system then it'd be trivial to log out the user a few times (and combine with manipulating what the user even sees such as which locations of the password to enter), or just simply be more patient. Also, what about database backups? Given enough of them and the ever-increasing frequency they occur and time that backups live, you could recreate more of the user's password than intended.