Can I launch an EC2 instance with encrypted volumes?

Yes! Either select the encryption keys you want to use under the Encryption column of the Storage page when launching a new instance (see the screenshot above), or specify the encryption key in your CloudFormation template by setting the Encrypted property to "true" under the BlockDeviceMappings of your EC2 instance. (This seems to be a new EC2 feature, please let us know if you encounter any problems using it!)