Earlier quoted context omitted.
How would spam filtering or searching work in such a service?
Spam filtering: Step 1. Spam filter Step 2. Encrypt Searching: Client side tool which builds a local index as messages are decrypted to be read for the first time. The index is it's self encrypted and incrementally synced between clients. That took me less than 5 seconds to think up. Google can spend time and money thinking up better solutions if they want to actually do something.
Search indexes are very large -- you don't want to double or triple the amount of storage your email client uses. Also, being able to search only mail that you've downloaded and decrypted is a terrible user experience. I'd estimate over 60% of the mail to my personal inbox is from some automated system, rather than directly from a human, and I typically don't look at them unless a search hits them.
It takes 5 seconds to think of solutions with terrible security and usability characteristics. Thinking of a system that will be a measurable improvement in security and will actually be used by people is much more difficult.