Let me clarify the discussion here about PC terminal software. There are two distinctions I'd like to make. The first distinction is between a terminal program and a mail/news reader. Terminal access is necessary so that all functions of the dialup service which are not mail/news can still be accessed. An integrated mail/news reader is desirable because this is a primary activity of many users. Ideally, you want both. The second distinction is between stream and file encryption.If you want to encrypt the underlying channel, you need a stream cipher and a D-H key exchange. If you want file encryption, you want a block cipher and public keys for communications. These two distinctions are correlated. The terminal nature of such software requires support for stream encryption. The mail nature of such software requires file encryption. PGP is a file encryptor, not a stream encryptor. You can't use PGP for the terminal line; you can you it for email.
As Eric indicates, the issue is not so much building encryption into the program but rather of having _hooks_ by which extra functionality can be added.
One useful discussion would be to examine just what hooks are desirable. The capability 'encryption' is too broad; one needs to specify just what variety and what purpose is desired. Re: dealing with mail software intended for humans.
The result is that the mail program you are running on the host computer may do some munging on the PGP message, like inserting "Press RETURN for next page" or perhaps some terminal control characters.
It is for exactly reasons like this that one of the hooks should be an ability to specify how one gets one's mail. For Unix, I would suggest POP, as Paul Ferguson has mentioned. For online services like compuserve, aol, etc., a separate protocol which spoofs their mail readers into sending you your mail en masse could be written. This also implies the existence of offline mail readers.
Plus, this only deals with the message-receiving problem, not the sending problem.
Trying to spoof a whole mail system on a terminal seems doomed. Offline readers are the way to go.
Then for outgoing mail you'd like to be able to drop into a user-defined editor which is run with a command line causing his file to be saved to some temp file name.
What editor you use is another hook. I use Desqview, and I love to be able to spoof Desqview into spoofing my editor (which is _always_ running) into editing my reply. So the hook has to be a bit more flexible that running an executable. Eric