As the upstream dev who wrote Shotwell's Picasa Connector, I can clarify
one or two things here. What we're really talking about here are two
separate issues:

Issue 1: does Shotwell store any user credentials locally that might
present a security risk?

Issue 2: should Shotwell use OAuth authentication for Picasa?

As regards issue 1, Shotwell stores no password information locally
whatsoever. When the user types in his or her password in the Picasa
Login Pane, it's held in memory only to prepare a secure HTTP request to
retrieve a ClientLogin access token. When we request this access token,
Shotwell only asks for a limited set of permissions. So there's no risk
of Shotwell reading your GMail.

As regards issue 2, Shotwell uses an older Google authentication API
called ClientLogin instead of OAuth. This older API is now deprecated
and is not recommended for new development (see
https://developers.google.com/accounts/docs/AuthForInstalledApps) so we
should probably update the Shotwell Picasa Connector to use OAuth. That
said, there's no indication that ClientLogin is any less secure than
OAuth. ClientLogin is just old.

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https://bugs.launchpad.net/bugs/782690

Title:
  Picasa upload not secure: asks for Google Password

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