Safe to disable legacy file vault in Mountain Lion?

Have an iMac with Mountain Lion installed and everytime it's logged off or rebooted it hangs at a File Vault backup screen. I did some research and found File Vault will only backup home folder when logged off or while rebooting. Since the home folder is huge it's probably just taking its time.

When I went into security preferences an alert popped up saying it was using Legacy FileVault. Is it OK to disable this?

Also, is the home folder not being backed up by TimeMachine during normal backups since it's FileVault?

Any suggestions or guidance would be appreciated.

Thanks.