Pretty sure the dude got his system keylogged, so we might be in for some more fun.
I'm not familiar with how instawallet works. But i hear that the site sends you a javascript app which is run in the browser. Your wallet is stored on the server in an encrypted form. In order to steal bitcoin you must have the wallet.dat's priv keys.
Lets assume instawallet folks are on the up and up, how would this attack have occurred.
So for a 3rd party to steal your coin he would have to:
1) obtain your encrypted wallet and brute force it:
-Intercept it by snooping your network
or
-crack the instawallet server and dl them all
If SSL is setup properly, i understand that is nearly impossible to intercept it. even if you can sniff every packet (See diffe-helman exchange)
Crackin the instawallet server, maybe it happened and they do not know/wont admit
But then your wallet would still be password protected. And unless you used a simple password (rainbow attack) this would not result in stolen coins.
2) Obtain your encrypted wallet + password
Again, he would need to crack the exchange, or some how defeat ssl AND have a keylogger on your machine
3) Send you a poisoned version of the javascript code that redirected your password entry to a 3rd party server in the clear:
--some type of dns attack, but even then the SSL cert should fail (not too knowledgable in this)
4)--Some type of malware (you've been rooted):
caught your encrypted or unencrypted wallet when it was paged/cached to disk by your browser (not sure how all browsers handle it)
caught the link to your wallet from history/bookmarks
caught you pass from keylogging
4) social attack: some one had physical access to your device, copied the link from your bookmarks/history and installed a keylogger/knew your pass
Any other attack vectors we can think of, and how likely are each above? What device/os did this occur on and is this the only device you accessed the wallet on? how long was the account open, and how long were the coins there before the theft? i'm guessing "a while" because you say you won this playing SD.