Earlier quoted context omitted.
Surely encryption with a shared key is strictly better than sending in plaintext? >In the extreme case, we could have some explicit pairing (sort of like Bluetooth) between 1Password mini and the extension. That is, the browser extension may display some number that you have to type into 1Password mini (or the other way around). With this user intervention we can provide solid mutual authentication, but that user act…
Not if the shared key is present in the host computer already, which it'd have to be if the host process is to decrypt anything.
Other non root apps can masquerade as the app intended to get the data, and if it's sent in plaintext, they get information they wouldn't if it used a shared key accessible to the intended app.