Do you have NTFS or the FAT32 filesystem (rightclick harddisk to be sure). Encryption doesn't work with FAT32. You can convert it to NTFS though:
1) format the drive and let Windows install again. choose for NTFS filesystem when asked.
2) Buy a copy of Partition Magic 7 (earlier versions won't work) and convert the drive to NTFS while keeping all the files.
Most people use imaging programs (programs that create an image of your HD and put it into one file).
Some that come to mind are PowerQuest DriveImage (very very good for making disc backups) and Norton Ghost. I would go with DriveImage. It's easy to use and is a two step process. Also, checkout the latest PC Mag... They ran a special on creating images using DriveImage.
Ep, glad to see you come back and tidy up...did want to ask a one day favor, I want to enhance my resume , was hoping you could make me administrator for a day, if so, take me right off since I won't be here to do anything, and don't know the slightest about the board, but it would be nice putting "served administrator osnn", if can do, THANKS