1) Most corporate standards require that the host be encrypted, not just the guest (since guests leak lots of information). Check with your security policy folks. BTW - do not run the Fusion encryption option. FileVault2 on the host is a better option than encrypting a guest.
2) PGP encryption does work within a VM on Fusion 5. Make a copy before you encrypt as a backup, and remove all previous snapshots. Be warned: It will fully expand the entire virtual disk when it encrypts. A 40GB disk takes 40GB even if you only have 10GB used). You may be limited in your ability to upgrade to Fusion 6 (i.e. things may break), so make sure you backup and test.
Please do remember that this may make your warning go away, but it is NOT a secure configuration.
