I just wanted to double check this. I copied my iPhoto library into a separate folder which I encrypted. Once mounted I can "browse" the folder, when I tried to add it to my folders which are indexed it would not show up in the folder list of possibilities.
I then made another folder which already on setup added to the indexed folders and encrypted it. Again same problem.
This leads me to believe that encrypted folders (even when mounted/unencrypted) cannot be indexed.
Is this right or maybe a bug of 4.0?