It's an interesting ploy, but the success is going to be based entirely on what type of beta tester you're trying to attract.
Personally, as an introverted tech, I'd be interested in signing up, poking around, and filing bug reports, but requiring me to spam my friends list for an invite isn't something I'm willing to do.
The number of people who pick '12345' or 'password' is astronomical. And forcing them to remember a "strict" password is more detrimental to the user experience than just having a user/password combination.
Besides, what are you going to do if you get dupes? "Sorry, that password is already in use"?
Checking out the site, it's actually pretty impressive. Not in the well-designed sense, but in the having-an-actual-product sense (even if it's, you know, a blatant ripoff of the sites he listed...http://www.globalcommunity.me/blog/ feels like it takes the cake in that regard). I'm curious about where he got his funding from.
Edit: The alt-text for his "Blog" image is literally 'scritter'. My co-workers are giving me funny looks.
I think that's specifically why people will still be using routers. Nowadays, most single computers still are sitting behind routers, despite the fact that they don't actually "need" to, specifically for the firewall protection. It's a lot easier to plug into a router and forget it than it is to have to deal with setting up a firewall every time you reinstall your OS.