Rick Merritt has a pretty comprehensive look at the issues facing Microsoft’s Palladium strategy.
A small piece of code ˜ which Microsoft calls the Trusted Operating Root (TOR) and Strongin and others call a secure kernel or, more colloquially a “nub” ˜ triggers the start of a secure process. The south bridge chip is involved in initiating the process via a handshake that Strongin described as part of the “secret sauce” of Palladium.
That handshake could essentially be the manner in which the nub presents a kind of signature to a separate security processor, essentially an upgraded version of the TPM chip. The TPM chip performs a hashing algorithm ˜ probably a high-end RSA algorithm ˜ on the signature and its private keys, stores the result and returns it to the nub. If someone tampers with the nub, a future hashing operation will change the result, leaving the nub with keys that do not match and shutting down the security rights of that process.