Yes, this has potential. Here are some frustrations I had with the UI though:
I didn't "have a passphrase given to me" yet so I didn't know what to do from the homepage. The text "free and no sign-ups" in the corner needs to somehow be visible even without mouse hover, IMHO, otherwise visitors will think they need a beta passphrase to proceed.
This is supposed to be super-secure, but the password suggestion was "stone", which is very insecure.
There are too many options available (yes, even though there aren't that many :) Somehow, you need to organize the options into different "work flows" that are easier to understand. After clicking "create new jot" maybe you could show a menu with the following options:
1. High Security & For one recipient: Here's where you put the "phone" feature (and maybe other options where people can type in their email address, zip code, etc)
2. High Security & Lengthy Password: Here's you generate a super long/secure password for people (which they can replace with their own)
3. Low Security & Easy To Distribute: Here's where you suggest a password that's just a simple dictionary word
Those are my suggestions.