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Why would they not support encrypted PDF? This may limit access to library books - although many library books are both PDF and Mobipocket. But not all.
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Well, no support for encrypted PDFs is going to make PDF support for it pretty much worthless.
One of the things that make the Iliad attractive was the idea that I could head over to O'Reilly and download PDF versions of manuals so that I could have them all in one convienent package. But I just looked at one of my O'Reilly PDFs and it says "This document has been encrypted..."
Checking all the other (legal) commercial PDFs that I have and they say the same thing.