That's a very good point; if the *user* specifices -o "|..." that *should* override the security setting.
What if the -o option comes from a config file; should that override the security setting? Probably not, because the override could come from a .dvipsrc file created by a malicious program . . . Gosh, there is lots of stuff that needs to be fixed in dvips; I'm very sorry for (possibly) holding up a new release. I'll make sure to spend some time this weekend on it . . . -tom