I've just successfully installed LMCE 7.10b3 using KUbuntu Gutsy Alternate install disk and installed it on an encrypted disk.
Works without any problems, the onlyt hin worth mentioning is that the non alternate KUbuntu live CD will also be need in the last step of the LMCE setup process.
Works like a normal LMCE system once it is installed, with the exception that a HD password has to be entered during the boot process.