I'm afraid you didn't read the TOR overview and/or didn't look at its source code. See [url]http://www.torproject.org/overview.html.en[/url]. TOR does use robust encryption all the way from your computer through the exit node. The exit node, of course, decrypts the traffic, because otherwise, it wouldn't be able to communicate with the destination server you're connected to. If you don't believe this, install a packet sniffer and try to see any unencrypted content leaving your computer via a TOR link.
For the sake of clarity and for the benifit of the community it should be noted that PP encrypts the link between your PC and the PP server. The traffic between the PP server and the destination server you're connected to is *not* encrypted, just like with TOR, for obvious reasons. Unless, of course, you're connecting to a Web server over SSL or to a POP box over TLS. I don't question the strength of PP encryption here. Even old Triple DES or CAST*28 would be good enough. Problem is, your traffic is unencrypted on some legs, and there is nothing you can do about it.
True. Does it completely thwart the possibility of traffic analysis and snooping? No.
TOR had weaknesses. I bet it has weaknesses even today. And it's true that anybody can become the exit node and hence snoop on your traffic. However, given the distributed and decentralized nature of the system, it's pretty damn good for anonymity. The author of the blog you're referring to tries to scare the readers. For example, he states that "More than *0% of TOR users do not encrypt" and gives a link to an article. One would probably think that he means that for *0% of TOR users, encryption between them and TOR nodes is not enabled for some reason. This is nonsense, of course. What the linked article actually says is that *0% of the users who use TOR don't use end-to-end encryption, such as SSL. Heck, I'm not surprised, *0% of ISPs still don't offer secure POP and secure SMTP to their ********s, despite that fact that turning on encryption for these daemons wouldn't cost them a penny.