The card encryption can also be tied to the device AND the password. Agree that a user needs to think it through before hand. Setting encryption to use the device key can be a problem if suddenly down the road the device fails or breaks.
The card encryption can be set to not encrypt media files, but it isn't always as straightforward as you would think. Right now, on my 9700 and the OS I'm running, medai files downloaded by the podcast app and written in the podcasts folder do get encrypted. This isn't really a problem with playback of audio files, but the video files lag and buffer frequently. The work around is to move the video files to the video folder and they are unencrypted in the process.
I can see the possibility of what Steve says on the flip side with recording video. Something to test and see.