ICloud – Will iCloud backups of iOS devices restore the iOS Keychain

The system keychain is stored in /Library/Keychains/System.keychain and the key to unlock it is stored in /var/db/SystemKey (its default file permissions are readable by root only). The location of these files is referenced in the security-checksystem script (from the security_systemkeychain source). It is even possible to test to automatic locking/unlocking of the system keychain by using

systemkeychain -vt

The keychain security framework allows non-privileged programs to make requests for information provided they are in the ACL stored within the keychain entry. Obviously if a user has root they on a system they can directly access both the file storing the system keychain and the key to unlock it, thus they do not have make requests via the security framework and are not beholden to the ACLs stored within the keychain itself.

(I didn't actually answer the original questions so let's give this another go)

How are the keys architected such that any administrative user can unlock the System Keychain?

The libsecurity keychain framework allows regular processes to interact with the system keychain in an authenticated manner using Apple's XPC interprocess communication framework (IPC).

Program A sends a request to access the system keychain information using IPC. A check is made that the requesting user is already in the wheel group and also knows the password of a user in the wheel group. Once authorization is confirmed, the privileged kcproxy daemon can be used to access material in /var/db/SystemKey, unlock the system keychain and return the requested information.

Are there cryptographic restrictions that limit what an administrative user can do with information in the System Keychain in any way?

No - an administrative user is allowed to access/change anything in the system keychain. Even if they couldn't, they could copy the underlying files to another machine on which they have complete control and just unlock/access it there.

Given an unencrypted system backup without /Users, how would you gain access to the keys in the System Keychain?

If the backup contained copies of /Library/Keychains/System.keychain and /var/db/SystemKey then I would copy them to their respective locations on a new OS X system and use systemkeychain to make the later unlock the former and dump the keychain database using security dump-keychain.

To answer your first question about the keychain and whether you should encrypt backups: the passwords in your keychain are already encrypted, that's why you always have to type a password (by default your login password) to show stored passwords. So there's no immediate need to encrypt.

Of course, you could add Time Machine encryption to provide a further layer of security. This is possible starting with OS X Lion and Mountain Lion (from http://support.apple.com/kb/ht1427):

OS X Lion and Mountain Lion let you encrypt the Time Machine backup external drive using FileVault 2.

FileVault2 also uses your login password, though. So if the bad guys are able to guess or crack that password, they will have also access to your keychain information. Choosing different passwords for login and for accessing your keychain would protect the keychain passwords in such an event.

Either way, use strong passwords, password quality is of foremost importance to protect your data.

EDIT:

The OP asked in a comment how to set different passwords for login and keychain. Here is how:

• Open Utilities>Keychain Access.

• Right click each keychain and select 'Change Password for Keychain XYZ':

  

If you prefer to use your current password as keychain password and change your login password, log in using another account and change your account's password from System Preferences>Users & Groups. That will only change your login password, not your keychain password.