So it seems my original assumtions were right after all!
Dropbox apparently has been misleading their client base with false advertisement about how Dropbox actually works.
Theoretically what they're saying now is that even though the info is somewhat encrypted, under AES-256, it can still be read by some employees at Dropbox because the keys are stored somewhere in their servers.
If this gets hacked it's all schnapparoni!
More on the links below:
Full Note - Link
FTC Complaint - PDF
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