If Google didn't provide something that people want, they wouldn't be in business. If Gmail flops and becomes a liability instead of an asset, it will go the way of the Dodo. People are smart enough to decide weather or not to use a service.
As for the security hole, come on. If someone is dumb enough to use an easy question, it's their own fault if their account is compromised. Security of your email account should not be legislated. The more government intrudes, the worse a product will be.
For my security questions, I like to use:
"Name of 7th grade homeroom teacher and the bumper number of your army vehicle."
If someone wants in bad enough to spend the time cracking that, I'm flattered!