@shawn - I think you are misunderstanding what the plugin does, at least as far as encryption goes. The plugin isn't encrypted.

The ONLY thing that is encrypted is the license key when it is stored in the database. None of the PHP is encrypted. Why is the license key encrypted? Because users requested we encrypt it so that their users and clients couldn't easily swipe it by looking at the plugin settings page. Originally we didn't encrypt it and it was added to the most recent version at the request of our users.

The code isn't encrypted, the license key is just hashed in the database.

As for "callbacks", what do you think EVERY plugin you download from the WordPress repository does? It calls back to the WordPress repository every so many hours looking for updates. It's how automatic upgrades work. Automatic upgrades are impossible without a callback.

Why does Gravity Forms callback to our server and not the repository? Because it isn't hosted in the WordPress repository so it has to ping our server looking for updates. If an update is available it gives you the option of automatic upgrade just like any other WordPress plugin.

So do you actually remove all the plugin repository update callbacks from every plugin you download? Seems like overkill to me. Not to mention renders the convenience of automatic upgrades useless as they don't work without a callback.