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I hope that data is encrypted at rest, so even in the event of a physical breach the data would be useless.

How much will that help when the adversary has physical access to the live edge server and can intercept IO to and from RAM and CPU?

Of course! And network traffic is encrypted even on LAN.

Somewhere on AWSs network it isn’t. How does it get from the Load balancer to your backend EC2’s if the load balancer is doing SSL interception

What EC2s? Cloudflare operates its own physical machines, it does not use AWS.