Love the idea as well! I'm not able to test this right now, but I was wondering if there's a block for setting up an encrypted Pi? If so: awesome! If not: are there plans to implement it?
What exactly do you mean by encrypted pi? The entire SD encrypted, one partition encrypted, or something else? If you have a script that does something like this, feel free to submit a block for it (guide at http://www.pibakery.org/docs/contribute.html) or send me the script and I can add it in for you.
Thanks for your interest in PiBakery!