Square D already has a patent filed on an arc fault device, and is awaiting U.L. certification.
I'm sure having the device already listed in the NEC ahead of time would probably help speed up bringing this device to market. It also would not surprise me to see Square D license this technology to all of the other device manufacturers as well.
The purpose of having an arc fault device would be in a re-model situation with an obsolete panel or breaker type. If someone is adding a circuit in a house with a Pushmatic, or Zinsco or FPE breaker panel, in order to be code compliant, one would have to change out the entire panel, as there is no such thing as an arc fault breaker for those brands.
I'm guessing the reason the line side to the device has to be in a metal sheath or conduit, would be for any arcing to cause a short to ground and trip the breaker.