Still, I wonder if there is a cheap encryption app that works on both my DT and iPhone. I just want to encrypt a file on my DT and decrypt it on my iPhone. Storing it on Dropbox is a plus, but not a requirement.
Work in which app on your iPhone?
That's not a rhetorical question. Every file that gets opened has to be opened by some application. Applications announce which formats they're able to open, and never get an opportunity to open any file they don't claim to be able to open.
Sandboxing on iOS is so tight that applications cannot even learn what other apps are installed, let alone what formats they can read. The closest they can come is to ask the OS to offer a file up for grabs. The OS (which does know) will construct a list of compatible apps and ask the user to pick one. That app will be told "some other app, I'm not saying which one, is offering up this file which I've given you temporary read-only access to. If you're interested, you can make your own copy of it, but you've gotta do it right now because your access is going to go away post haste." The program offering up the file never learns which app (if any) took the file, or even which apps were on the list.
That's how Mail passes attachments to other apps, and how Drop Box hands files off to other apps. Any app can pass files to Drop Box, because it claims to be able to open anything.
If your word processing application cannot already open encrypted files, compressed files, DMGs, etc., there's no way you can make it open one. The best you can do is write your own app that recognizes the encrypted file, decrypts it, and offers the decrypted file up for grabs. It will never know which, if any, application accepted the grab and made a copy. You will be forced to place the decrypted file on disk (well, Flash), but can delete it immediately afterwards.
Or maybe someone's already done that? Visit the iTunes App Store and search for "decryption". There are some apps there that may meet your needs.
Usage might be something like: you take a .doc file on your Mac and compress it to a .gz, which you then encrypt to a .pgp file. Put that in Drop Box. Drop Box would offer up the .pgp file, which the special purpose app would decrypt and expand back to a .doc file, which it would then throw out for grabs. The user would be confronted with two pop-up menus, first to choose the app to do the decryption/expansion, and then again to choose the app to consume the resulting .doc file. Two more user interactions to get the edited file compressed and encrypted and back to Drop Box.
There's a tradeoff between security and convenience. Apple puts the priority on security.