Depending on your Mac, you might not want to upgrade to OS X 10.7 or 10.8 as it will not run the PowerPC based software your currently using costing a bundle to replace it all, also they will slow down your machine if it's not a more recent issue. You don't want to upgrade OS X without AppleCare defending your possibly bricked logicboard that's for sure.
Filevault encrypts the boot drive, however in doing so makes it near impossible to fix if you have a software issue and need to recover files directly or by using specialty software. Also it robs the machine of performance even more than the Lions do. So you will really need a SSD to work best with 10.7/10.8 and Filevault, then it has to be freshly installed. Filevault needs 50% free space on the boot drive, then it's going to write to the slower 50% half of the hard drive where performance is terrible compared to the first 50%.
Also Filevault is cracked under certain conditions, and if someone gets their hands on the machine (like the law) and knows what they are doing.
If you take your Filevaulted machine to Apple to fix, they are going to require the password to fix the machine obviously.
Software based encryption is vulnerable, you might want to instead place your sensitive data on external self-encrypting hardware that doesn't rely upon software or computer hacks/bypasses (ike freezing the RAM) to get to it.
http://www.datalocker.com/products/datalocker-dl3.html
Iron Keys for portable USB self encryption, both work with any computer, so your not locked into one platform.
With the senstive data off the computer and on a external device, there is the option of removing, hiding and securing the device. If used with a computer that's never connected to the Internet, it's safe from snoopers, except from a survelliance van parked outside your door.