Filevault encrypts one's entire user directory - at least as of OS version 10.3.7. It makes little sense to encrypt the entire music library, not to mention it probably slows down your machine. If you want to move your music library outside of your user directory, say to /Users/user_name/Music/iTunes/iTunes Music, you need to tell iTunes under Preferences->Advanced and then choose Advanced->Consolidate Library (menu not preference). This will copy (not move) all the music to the new location. If you skip either of the two steps and move the library by hand, iTunes will not be able to find your music. If you do not have enough room on your harddrive for two copies of your entire music library, I suggest you use an external harddrive. Not a bad idea anyway, to make a copy of your user directory incase of a malfunction during the initial Filevault encryption.
Now lets says you replace your harddrive. You can follow the above procedure if you remember, but if you don't, you can not just copy the music directory and the iTunes Library file unless your harddrive is renamed exactly the same. The work around is to fire up a blank iTunes and drop the entire music library into it after you have set up the music library outside your home directory as above. Then, you can exit iTunes, copy the iTunes Library file, and restart iTunes. You should then have a working iTunes with all your old playlists etc.