[stipes]

Yes, Tor is for anonymity, not privacy. But that just means you still need to be operating over a secure channel---be that SSL or sending the documents encrypted, etc.

The fact that they operated compromised nodes does NOT diminish from Tor's anonymity. Most anonymity systems assume about 1/5 of the nodes will be compromised (which is reasonable barring a very large global adversary).

In general, timing attacks are the biggest issue in low-latency anonymity systems: if you can track packets going into Tor and coming out of Tor, you can link the sender to the destination. But, if the traffic was encrypted, that still doesn't get you the documents themselves.

Edit: More specifically to the grandparent---even with a compromised exit node, that doesn't reveal the source (that's the point of onion routing). The case of China is a hard one, due to the level of state control. There are ways to request exit nodes in the Tor network (I have no idea how well documented this is), so for them, selecting an exit outside China for accessing international sites would probably be best (this would remove/greatly reduce the risk of Chinese gov't timing attacks).

There has been some work on strategically choosing entrance/exit nodes to reduce the risk of these kinds of timing attacks, but I don't know of anything that has been published or implemented yet (I haven't worked on that particular aspect in a while). Basically, some of the methods would have automatically chosen exit nodes outside of China (to prevent exit->destination traffic from travelling through the same autonomous systems as source->entrance traffic).

[stipes]

After some brief digging, it appears there has been some published research on location diversity in path selection in Tor since I last worked on that problem. https://docs.google.com/viewer?url=http://www.cs.rpi.edu/~ed... has some good results, if anyone is interested.