• Smart enough? They would be smart enough NOT to save the encryption key. Where are they going to save it?
Oh I don't know. Perhaps where they save it now for doing the encryption on the computer or cloud?
• All storage on an iPhone is encrypted.
THINK! Were that true, there would be no need to encrypt the data before storing it on the computer, and no need for a password before backup. The supposed bad operator that you claim is stealing data would get only encrypted data from the phone, so there would be no reason to care if a virus was calling for a backup, and therefore no reason to call for the user to type their password. So either Apple screwed up even worse than we thought or you're wrong about the phone encrypting the data.
And further, if there is no encryption on the phone, assume that the bad operator you postulate sent a request for backup, and the password request came up. If that happens, the vast majority of users would supply it. And once the bad guy has the data they wouldn't have reason to ask again, so the user would never know it happened.
That's why that constant password business was nonsense from the start.
Do you even think about what you say? Seems to me that instead of looking at the problem and seeking a solution, you're focused on finding fault with anyything that everyone else says.
• I did see it, and rejected it as a major security vulnerability if the key is on the computer, it is a back door.
Hmm... if an encryption key is sent to the computer only at the phone's direction—once—then encripted and stored, that's a backdoor? Seriously?