Here is a suggestion for the password problem: Have a small program that has a configure file built in with the password information. When the user signs up, have it save the program and configure file onto a flash drive or cd, then have them store it in a safe place. If they need to recover their password, they just need to put in the drive/cd and run the password recovery.
There will still be ways for stupid users to mess it up (like not following the instructions, or loosing the drive) but it really would be on them if they did - as long as the site clearly explains the process and emphasizes the importance.
This would also have the effect of teaching more people about better security techniques, rather than building in backdoors for forgetful people.