We all know that hardware can fail. Assuming my main PC fails, then what? I can't log on to let my temporary, replacement or upgraded system be used with my Steam account.
I've never used the Blizzard system, I quite WoW before they brought it in, but is it similar to a Barclay's card reader that they use for online protection, where by you put your card in (for WoW I assume account credentials), type in your pin (I assume WoW pass) and it comes up with a "unique" code, but you can use your card in any reader because they are all the same?
I know it is a lot of faffing, but this is surely better than anything that can potentially fail. You lose your pass creator, just get a new one.
However, you still need a username and pass, and that would have to be stored to be confirmed, so that is just another step, but essentially what you have now, with just an extra piece of hardware...
I quite like the picture idea mentioned before, they send you a unique picture or code or something that you use to say "this is my account"