"If a theoretical cracker disassembles the code, he absolutely must understand RSA at some level, extract n, and factor it in order to create a key generator."
Seeing some cracks I have no doubt that this is possible. They enjoy a challenge.
" so it's pretty much a drop-in replacement for whatever hashing scheme that most software tends to use. "
This guy isn't ever going to secure anything, eh? Dongles had reasonably good crypto, and clear instructions for use. programmers often ignored those instructions, and did things wrong, leaving many dongle-protected softs easily crackable.