I know it'd be better to do it serverside, but this project is just for a bit of fun.
Dragging files into the browser should be easy enough if I take advantage of the various methods available. (gmail style)
Encoding/decoding should hopefully be fine. I've seen some as3 zip libraries so I'm sure I should be fine with that.
My issue is downloading the files at the end..
window.location = 'data:jpg/image;base64,/9j/4AAQSkZJR....'
<img src="data:jpg/image;ba.." />
<a href="data:...." target="_blank"> (Untested)
Use downloadify instead of data URLs (would work for IE as well)