There's some alarming sounding stuff in this thread, so I'd like to discuss the issue from an authentication security perspective. "dan" began to do this already, but I'd like to elaborate on his points for those who are not experts and want to understand more about it.
To extract the AES key in the way described means that an attacker has to obtain and destroy the yubikey. But since they possess the key they could simply use it (intact) to make OTPs, and have exactly the same benefits. In other words, getting the AES key by destroying the yubikey
does not enable ANY new attacks that could not be done much more easily by keeping the key intact and pushing its button. This hardware attack, while neat and seemingly scandalous, just doesn't matter.
In contrast, if an attacker could obtain the AES key
surreptitiously (by some means without the user being aware of any foul play), then THAT would be a serious new attack vector.[1] The reason is, the user and server would continue to use the old yubikey AES identity and be unaware that it had been "cloned".
If the yubikey is stolen (whether they pull the AES key out of it or not) that factor is compromised completely. The same is true for any type of stolen token.[2] That's why two factors are so important.
The inexpensive cost of these tokens (especially in high volume) is a mitigating reason for the relative ease of "cracking" the device. If you're using 2 factor security with yubikeys and passwords, it's incredibly more secure than 1 factor with passwords alone. It's excellent protection against key loggers and other common password vulnerabilities, and all but the most "cloak & dagger" of attack scenarios. As with all security, this is a cost/benefit trade off, to be decided by each organization.
Disclosure: My company makes AuthLite, which uses yubikeys in our 2-factor logon solution for Windows networks. So I have a stake in Yubico's success, although one could also argue that if there are competing devices we could just make the software use them instead.. so I think I come out pretty balanced
[Footnote 1]: I refer to attacks such as ripping the AES off the authentication server in secret, doing side channel attacks on the intact key, or if you could perform Gleg's extraction without destroying the key (with teeny tiny drilled holes or something) and return it to the user quick enough that they don't report it missing.
[Footnote 2]: Apart from devices that need a pin code just to display their OTP; these are actually two factors wrapped together in one device.