Don't know about encryption, and I'm not sure why would you want to transfer files via external hard disk - copying then onto hard drive is not much faster than copying them through ethernet - but with modded KFurge firmware torrents are reliable and working well.
I am now very satisfied with Wl700gE, torrents and emule work great, for graphical interface I use sancho which is great too. Only small drawback (if you're used to normal PC-based torrent clients) is that you can't delete torrents from sancho (GUI), but have either to use FTP or Telnet to router to do it. But you just get used to thet, it's not a big deal. Perhaps this could be solved by setting permissions on .mldonkey folder, but I was too lazy to try :-)
As network disk, it is a bit slow, but it works (i.e. I can watch DivX films from it on my HTPC). WiFi works great, I have 2-3 notebooks and Skype phone connected at the same time. Printing is OK, bit slow to open print properties, but prints normaly. Web-Camera part does not work at all. You can connect external Disk/flash disk to USB port, but I never tried copying from router to disk (just from disk to router).
All in all, I would recomend it to anyone (on condition to flash firmware to modded KFurge version).
D.