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1) "encrypted for speed and security"?!?!? Are you kidding? Encryption introduces a speed penalty by introducing an extra layer of file management before the data is written down.
Speed penalties by encrypting data in RAM can be negible. The file system may or may not handle this - I know in Windows 7 it does, but that is because encryption is optional and can vary, from EFS to Bitlocker. With WP7, since it is so engrained, it could be in the kernel than processes this.
With WP7, encryption is there by default, and by having a hardware spec for the SD card and forcing it to always be there all of the time, you can easily encrypt files faster than Windows Mobile 6.x could since it had to always check for the card before getting underway, and then you had various card classes it had to deal with.
All things being equal, yeah, WP7 could probably read/write files faster unencrypted than encrypted, but with a 1GHz processor, that hit should be minimal and unnoticed by the user at all, and again, encrypting on WP7 should be faster than unencrypted sessions with WinMo.