The transponder, and other electronics in the aircraft, must be equipped with on/off switches and or circuit-breakers. This is not just to satisfy certification requirements of the FAA, but in event of a short-circuit and/or fire from this device. It would be like replacing one of the circuit-breakers for your home with a fuse block and a penny jammed in the fuse block. If the item short-circuits and you don't remove power a fire is guaranteed.
There isn't going to be a technological fix that prevents a pilot from hijacking or crashing his own plane. Any proposed system will far more complicated, impossible to certify, and have so many failure modes it would take decades to test.
I'm sure this question will be addressed in the eventual accident report, so a few words from an engineer.
Let's recall that the B777 and its systems design was done in the early 1990s. Electronics and communications systems design has made immense progress since then.
While the above hijack or crash prevention system may be a difficult task, a far easier goal would be to improve the communication and reporting capabilities, as well as the "tamper-proofness" of the airplane so that it would be almost impossible to go invisible the way MH370 did.
For example, it is not that difficult to design a smart circuit breaker which before actually cutting the power instructs a communication device (e.g. ACARS) to send out an alert , for example "I was manually pulled" or "I need to break now due to overcurrent" or even "I'm sensing high overtemp".
Likewise, an "Equipment bay hatch being opened" alert would be a piece-of-cake to implement.
With some careful systems design, the act of "going invisible" would then not be possible without at least an alert message with some details getting out to the outside world. In the MH370 case, it might have been the difference between scrambling primary radar or military interceptors, and the agony the world has experienced last week. Perhaps even the knowledge that "you can't go hiding without announcing it" will discourage anyone from trying.
PS: It is a bit startling to realize that MH370, as it now seems, was just one circuit breaker pull away (Satcom) from full success in its go-hiding maneuver. As this reached the public domain yesterday, it becomes evident that something needs to be done to prevent further attempts.