[Samsung Galaxy S7 Edge Questions and Answers] MR_ROBOTTT:
I kinda like your out of box thinking. Working as a mobile application developer in a Software Engineering company, you actually sound like my project manager questioning on project delivery when there are technological limitations :)

All most 99% of smartphones are programmed in a way that SD card will be formatting in FAT file system. This is maintain platform independent data transfer capabilities. I don't think an application and hardware developer like Samsung force the SD card to format in ext4 just to add extra features to a mobile application (MyKnox). It is like sacrificing the whole meaning (capabilities and advantages) of an SD card just to provide additional storage capabilities to just one application which is only limited to Samsung smartphones.

Even if they did sacrifice portable storage capabilities and move forward by making the SD card formatting in ext4, then again SD card speed is not enough to run a virtual machine. (this is a limitation which cannot be addressed with current technology). Imagine my previous example, 4K capturing cannot be done with average SD cards out there. A virtual machine contains multiple applications like camera/gmail/contacts/hangouts etc and system processors (yes, processes use disk more frequent than 3rd party applications, and these are highly depended on disk speed) All these cannot simultaneously execute on a SD card due to slow data read/write. Avoiding these and programming applications results in runtime errors when the read/write speed is not bearable by the storage device.

Don't confuse yourself with data encryption and virtual machines. These are two very different technologies which cannot be compared. A data encryption can run within a virtual machine. Virtual machine is much more than one file security design pattern. This is like an isolated security layer which can handle network input and outputs, file input and output from the base operating system etc while maintaining its unique encrypting key.

Here the advantage they are taking by implementing a VM software is to give isolation between operating system. If they let some secure application data to be saved in shared SD location instead of the virtual partition, base android OS can manipulate (or people can write applications to manipulate) data on common SD partition. So there is no additional security layer. Also in a data theft whole SD card needs to be wiped. Basically what MyKnox does is giving a clear separation between two operating systems and its data. So MyKnox can be wiped or locked without any interference by main operating system.

Also note that data encryption is a basic and the most simple security level when it comes to data protection. Almost all servers running and accessible on internet has its unique data encryption. Im sure you have heard attacks on those severs and steal it's data. Basically once you find the tunnel (network layer) which gives the access to right components, these data can be manipulated over the network and make the system think it's system's own doing. MyKnox (VM) is like another firewall which keep these data one step below.