The USB Dongle idea's quite good as a means to store authentication - for the devices that have USB, which is most computers, if not phones and tablets. Web browsers and such would need to be modified to accept them though, I guess.

Ha - and it looks as if it's just a hardware hack away for anybody to have one, no website updating required...

http://hackaday.com/2012/03/05/usb-dongle-generates-and-enters-your-passwords-so-you-dont-have-to/

Plus there's Yubikey: http://drupal.org/project/yubikey