> Because tar does not support encryption/compression on the inside of archives.
Yes it does? Just encrypt/compress all the files before tarring.
> Not indexed
The reason tar doesn't have an index is so that tarballs can be concatenated. Also IIRC, you only have to jump through the headers for all files. Still O(n) where n is the number of files, but you don't have to scan through all of the data.