I just pulled up my old project to refresh my memory.
I worked on this off & on for weeks before finally moving onto other projects. As I recall the code above fetches files from the file system but does not actually prevent the files from being stored in the database. Which defeats the purpose of this code...
My original idea was to override a few methods in "Telerik.Libraries.Data.DefaultProvider". However, after a lot of hacking, I realized that this class is primarily just passing off work to "Telerik.Cms.Engine.Data.Providers.DefaultProvider". Consequently, overriding these methods doesn't change a lot of the Library Provider's behavior.
To fix this, I inherited from the "Providers.DefaultProvider" class instead of the "Libraries.DefaultProvider" and attempted to override a few of those methods. This created a lot of problems and I was eventually informed that this would not work. My only alternative would be to create my own persistance class from scratch. This would be a sizable job and strays pretty far from core Sitefinity functionality.
I'm okay with tweaking the system, but I don't feel comfortable telling customers to completely re-write core providers. Regardless of whether it works or not, these customizations probably won't survive an upgrade. At this point I abandoned this project.
Sorry for the bad news. I really did try on this, but I couldn't come up with an elegant looking solution.
However, if I'm reading Ivan's previous post correctly there is a partial solution coming with SP3 in a few weeks.
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