Yes, but I thought the public key of the sender is used anyway on the input, so it would be no problem to use it on the output as well.
Yes this is very true.
...not to hide the source but to hide how much of the money was spent because e.g. in the example below by redhatzer, it wouldn't be possible to know if the sender sent 4 to one person and 1 to another, or just 1 to one person and pocketed the change. However given most transactions have one recipient and then the change coming back to the sender, it's all pretty obvious on blockexplorer... but that's an artifact of the bitcoin implementation and anyone creating their own transactions could hide in the noise better... E.g. a pool paying it's miners could have one huge transaction with one txin and multiple txouts without it being obvious which were change.Will
