How about running untrusted applications?

Of course they are, but this doesn't mean that a window manager cannot get its own way to check whether the application is trusted or not (not so simple in practive but doable I think) and display a trust indicator next to the window tittle.

Not sure what you mean about your point 2, but clearly untrusted applications must be restricted in what they're allowed to do (no real fullscreen, no input redirection, etc).

> 3. Aren't server side decorations something exclusive of X? meaning that applications relying on this would not be portable to Windows or OSX?

Portable applications exist already today with X and Windows/OS X, so I'm not sure what is your point.