The local option is something we're definitely trying to wrap our heads around. Right now many of the features we offer are thanks to being hosted. For example, the reason you have instant access to all 175,814 node packages (and every version of those) is thanks to a pretty unique setup. On the other hand we totally understand your use case and letting us know about it certainly makes us take notice.
Thanks for the response. It's good to hear that you're thinking about local access.
I realize that the node module thing is just one example of a feature that relies on hosting, but fwiw I wouldn't mind having to manually maintain a local package.json and node_modules folder for whatever libraries I want to be able to use in the environment.
First of all, I think that both hosted and downloadable models are both equally viable, and IMHO both are worth pursuing simultaneously.
While I discuss the merits of a downloadable version below, first of all, staying hosted makes a lot of sense, not just because delivering all of npm is... tricky (kudos for managing to provide it :P), but also because it gives you the option to introduce a pricing structure in the future. (That said, please definitely do keep your current featureset free. XD)
A Google Maps Overlay[1]-style API could be a viable solution for developers who choose to use your hosted system who also need access to local resources: I'm thinking something SSL-encrypted (using symmetric keys configured via a dashboard), and perhaps a small (opensource, auditible) endpoint library that connects to your server (over WebSocket or XHR, to work around pesky firewalls), which the developer would be able to connect to the relevant bits of their data with a minimum of SLOC. (I'm not sure if it's outrageously unsuitable - it's probably only useful as an idea - but Netflix' newly-released Falcor library[2] comes to mind.)
I also think a cut-down version of your system could be a very very interesting competitor to Jupyter/IPython, and it's (reasonably) rare for competition to be a bad thing.
(Looking at the whole picture, there will undoubtedly be political types who will take one look at Jupyter/your system and will point out "but one's fully open source and one's freemium," but nobody would be able to argue that, done right, freemium does undeniably have more resources going into it, and the developers involved get to work on something awesome AND go home to a full kitchen at the end of the day, which does sort of guarantee a certain consistent level of quality.)
In this model, you would have this hosted version with ALL THE PACKAGES (wow!) - and maybe some awesome paid features down the track - along with a slightly smaller-scale Github repo that people can clone and fire up locally.
Besides being "trendy", the downloadable version would be a boon for people who, for whatever reason, MUST have an air gap in their systems for whatever security purposes, but happen to be using Node for their work.
Finally, it'd be cool to offer the local version as both a loopback web server (for a standard browser) as well as an Electron[3]-based "standalone console". That puts you visually on par with IPython web notebooks and QtConsole.
Oh, and speaking of UI, one other thing would be to keep the downloadable version's UI as identical to the hosted version as possible, in both look and feel: it'd be a neat little mind trick to make devs feel like they're running your hosted version locally :P