Yeah-- that was a pretty braindead response. I was thinking "authorized hosts". Now I feel silly.
re: the public key authentication for domain accounts - They're calling the undocumented NtCreateToken() API in "win32auth.c". They don't need a password to create a token going that route. They've also got an LSA Security Package to do the key validation inside LSA. I'm looking at this very quickly, but I'm not seeing that they extended the AD schema to store the public key in the user's AD account. That would be the best way to handle it, ultimately-- just have the DCs use that SSH-LSA Security Package to authenticate the users against the public key stored in their AD account.