This model of using a device driver means that there is going to have to be at least two partitions on the disk: one to boot from, and one to be encrypted. The device driver itself and the operating system can't be on the encrypted disk, because those components must be loaded before the encrypted disk is accessible. Most people are not going to go out and buy a new disk to be the encrypted partition. Thus, this is going to mean a full backup of the existing disk, an operation with FDISK to do the partitioning, then, assuming the driver works right the first time, restoring everything else on the encrypted partition. What is the effect of _this_ on user acceptance?
Why not have the device driver create a file (possibly of varying sizes) on the hard drive which the encryption device driver then makes look like another drive?!? This is how the compression programs work, seems to me a pretty viable way to solve the encrypted drive problem as well. A good place to start on this would be something like DOS's VDISK device driver, it maps a portion of RAM into a RAM-disk... a good way to understand how a DOS device driver should map something that has no disk-like characteristics into disk-like characteristics.