Does anyone know if the new capability to do encrypted time machine backups over a network in Mountain Lion will backup to a volume on another Mac?
I didn't try that in testing, but it does work to an external HD connected to a Time Capsule, or even an Airport Extreme (not recommended, and not supported by Apple).
So I suspect it will. Give it a try. You'll know immediately -- if the Encrypt Backups box is disabled, it's not going to work.
Let us know.