I am having the same issue using Lion 10.7.2 and an external hard drive.
My external hard drive is a WD 1Tb Caviar Black mounted in a Voyager Q connected to my Mac Pro using Firewire 800. Previously it was formatted as two 500Gb Mac OS Extended Journaled partitions, but NOT encrypted. I wasn't having any problems with the disk and was cloning my 500Gb boot drive and a 500Gb partition holding VMware images to it. Everything was working fine.
I then decided that it might be better to encrypt this external drive, so I fired up Disk Utility to repartition it. I erased and recreated the forst 500Gb partition as Mac OS Extended Journaled Encrypted and that completed without any issues. I repeated the process for the second partition and Disk Utility crashed. I tried again and Disk Utility crashed again.
Tried erasing the whole disk and creating just one encrypted 1Tb partition (rather than 2 x 500Gb partitions) but the same thing happens. Disk Utility can't seem to leave the whole disk in an intact working state with encryption enabled.
I'm really glad I tried this out on an external drive first! Judging by this thread, there is some common cause that makes Disk Utility crash for some people when trying to encrypt drives. Here's hoping that Apple see this thread and investigate. (I'll send feedback to them direct as well as the crash reports).