I hope this isn't too blunt, but the task you are undertaking here is extremely difficult, and the odds of you getting it right are slim. Security flaws are most of the time caused by mistakes in implementation, not in the underlying technologies. In order to make a system like the one you've described secure, you have to use the correct tools and the correct methodology and account for all of the edge cases or the security of the entire system will be compromised.
That's not really a helpful answer though, is it? When you are building a system like you are building the question you should be asking shouldn't be "How do I do this?" It should instead be "What is the way I can do this that relies the least on myself?" The answer to that question is to use tried and tested systems wherever possible, and to roll your own solutions only as a last resort.
To answer your first point about encryption, it doesn't make sense to worry too much about securing a key in memory of the server. If an attacker has enough access to a machine to read your keys out of memory, you are totally and completely hosed and any solutions that you have coded up aren't going to help much any way. In other words, favor securing data at rest and data that is moving over the internet, since that is where most attacks are going to occur.
As far as storing the data goes, I don't see any reason why asymmetric crypto needs to be involved here. I would use something like PBKDF2 to derive a key directly from the user's password, then encrypt the data and store the encrypted blob in a database. I would recommend a database over a flat file because managing a folder full of flat files is tedious at the best of times. Databases may not show any solid benifits in speed or security over flat files, but they come with many other features such as pooled connections and they also make backing up data much easier than flat files. Use the simplest system you can to minimize your attack surface, and use thoroughly tested open source tools whenever possible. If you can find a way to use GPG for the encryption and key derivation part of things, I would recommend it.
As far as transfer goes, I believe that you are thinking about things the wrong way. Don't do any encryption client side. Browser javascript is not suitable for cryptography, as explained in this article. So long as you make sure that you use TLS/SSL for all connections to your site, you shouldn't need to worry about transmitting data unencrypted. For an example of why it is hard to do client side encryption, do some googling about the security of MegaUpload's successor, MEGA.
Finally, I wouldn't trust any one dude you get an answer from on the internet, including myself. I would do a lot of research about this sort of thing before committing to a solution. Also, I might recommend asking this question over at the IT Security Stack Exchange.
-- EDIT --
Somehow, I totally missed the fact that there are three parts to your system, the client (browser), the server (database), and the connector that imports data from the VisualFox Database. This actually makes the whole system a lot more complex, because there are essentially three parties that need to share a secret, instead of two. What I would recommend is not to encrypt the data based on the users password, but to instead encrypt it based on some server password. I'm having a little bit of trouble thinking of a good way to describe this process, so I'll give you an example workflow instead.
Server Side
- Admin starts server.
- During start up, server code asks for a password.
- Server uses PBKDF2 to derive a key which is stored only in memory.
- Server spawns a thread that will poll the VirtualFox Pro server every X (days/hours/minutes) for updated data.
- Server enters loop awaiting requests from browser clients.
Updating database
- Main Server's child thread requests an update of data from the Virtual Fox Pro server.
- VirtualFox Pro server dumps a report containing data for client's with modified entries.
- VirtualFox Pro server opens secure connection to main server (ssh, sftp, etc) and transmits zipped data.
- One by one, the main server uses the PBKDF2 derived key that is stored in memory to decrypt blobs stored in a database, update them with new data, reencrypt them, and store them back into the database. This process should all happen in-memory.
Browser client connects
- Main server receives https request from client.
- Main server uses some third party authentication framework to check clients credentials. This framework should use bcrypt to hash passwords and only store the hashes on the file system.
- If the authentication framework positively identifies a user, the main server will decrypt the user's blob using the PBKDF2 derived key in memory and send the data to the user.
- When the user's authentication cookie expires, the main server will stop using the PBKDF2 derived key to decrypt data, and will instead prompt the user to re-authenticate.
This model is more in line with how traditional websites work (which means that you can rely on third party, bug tested frameworks), but data is encrypted/decrypted in memory before touching the database. Ideally, you could use GPG or some other keystore for managing the encryption keys on the main server as well.
Encryption can always be reversed. The point of encryption is to take a message and encode it with a secret key so that only another person who has the key can reverse the encryption and read the message.
What you're looking at here is hashing, which is not the same as encryption, though cryptographic techniques are often used in implementing hashes. The idea of a hash is that it uses complicated mathematical techniques to build a new value that maps to an old value, which is repeatable. There's no key, and it's not meant to be reversed. A cryptographically strong hash is created with the mathematical property that, if you have value A whose hash is value B, it's very, very difficult to intentionally create another value C that also hashes to B.
Hashes don't need to be reversible, because they're used for authentication. If you give me a username and a password, you really don't want me storing that password in my database, because if someone hacks in and gains access to my database, they could get ahold of your password! So instead, I'd store the hash of your password in the database. Then when you log in, I check to see if there's a username that matches yours, with a password entry that matches the hash of the password you sent, and if so you're authenticated, because it's very difficult to create a hash collision (two values that hash to the same value) with a good hash, so I'm almost perfectly certain that the password you used is the right one.
The other property of a strong cryptographic hash is that it's very difficult to reverse. You know that the value 0WrtCkg6IdaV/l4hDaYq3seMIWMbW+X/g36fvt8uYkE= is the hash for "dominic" because you just worked it out, but if you didn't know that, and didn't know where to start looking, and all you had was 0WrtCkg6IdaV/l4hDaYq3seMIWMbW+X/g36fvt8uYkE=, it could literally take you billions of years to figure out that the original was "dominic", if the hash is a good one. Again, this is useful to prevent collateral damage in case a password list gets stolen.
Best Answer
Don't write your own encryption program. You will do something wrong.
Media persistence like you talk about is a real problem. There are tons of old records stored on reel-to-reel tapes and not much equipment left to read it. You as the data owner will have to make sure you're moving to newer technologies as appropriate.
That said, 7zip is open-source. You can grab the source, build it yourself, and save that compiled binary. If 7zip shuts down in 5 years, you still have your copy of the binary -- the same one you used to do the encryption. Use it to do the decryption.
If you're going to be storing data for long periods, I'd also suggest including some kind of PAR2 recovery data alongside the encrypted container, to repair the container against literal bit rot.