This is vital to make this application really usable. As it stands I need to physically log into my Mac with a keyboard and mouse before I can start using the software.

The true benefit here would be that the server app would need to run as a daemon process of the root user, and therefore not be able to run on a per-user basis, hence not take up precious menubar space. Ideally this would put an Air Keyboard preferences pane in System Preferences as the way to set the password, which would also not be saved in plaintext in the launchd plist.