Windows Home Server backup functions within a running OS, so if that OS has drivers loaded to decrypt a BitLocker or TrueCrypt container and present it as a disk drive, ou can back that drive up. And during the backup it's not "encrypted"; the clusters that are backed up are the actual decrypted data. If it didn't work this way, then Windows Home Server might (probably would) have to back the entire container/encrypted drive up every night. So no, there is no way to back up the data in an encrypted fashion.
As for encrypting the server itself, no, there is no way to do that either.
I think you're mistaken in your thought that people only want to back up a small amount of data. Perhaps that's all you want to do, but I think most people want to be able to restore all their data and programs to their "last known good" configuration after a hard drive failure (the most common failure in a computer). Windows Home Server isn't a great solution for someone who wants to back up a few critical files, but it does do a bare metal restore with less pain (for most people) than other products.
If you feel strongly about this you can submit a product suggestion on
Connect. I will warn you that Windows Home Server is intended to be an easy to use/configure product for the non-technical home environment, not an enterprise class storage/backup solution. As such, anything that adds complexity to the product will need a lot of justification.
I'm not on the WHS team, I just post a lot. :)
