"Further, as groups of characters are typed, the images on the dialog change to distract the would-be onlooker from observing the number of (extraneous) characters typed. "
Actually, the hieroglyphics are just another dubious security feature. The theory is that you know what the hieroglyphics are for the correct password, and if they aren't shown, the login box is being spoofed. In reality, this is dumb, since any regular Notes user just tunes out that part of the login box.
Presumably the hieroglyphics are generated based off a hash of what you're typing, so there will not be a one-to-one mapping of hieroglyphics back to data typed. Also, since the hieroglyphics are nonsensical and change quickly, you would probably find it easier to watch their physical keystrokes then trying to memorizing a stream of symbols.
That said, all logical bets are off when analyzing a hare-brained feature like this.
Actually, the hieroglyphics are just another dubious security feature. The theory is that you know what the hieroglyphics are for the correct password, and if they aren't shown, the login box is being spoofed. In reality, this is dumb, since any regular Notes user just tunes out that part of the login box.