Apple has released a TechNote explaining that using Mac OS X 10.3 Panther’s new FileVault data-encryption feature can affect performance. The issue is that FileVault encrypts your Home folder, which by default is where iMovie saves its projects (in the Movies folder). The Home folder becomes one large encrypted file, so anything stored within must be decrypted on the fly. For most documents, this isn’t a problem, but iMovie prefers to have the best data rates possible, and the encryption/decryption process slows performance enough that you can get dropped frames, slow disk response error messages, etc.
I think FileVault is a great idea, but poorly implemented, especially if you’re working with iMovie files: the DV media can easily occupy several gigabytes of hard disk space, which all gets rolled into the big encrypted file. To avoid the problem in iMovie, move your iMovie project folders out of the Home directory or onto another drive. (However, Panther currently has problems with some external FireWire 800 drives, and people are reporting that some FireWire 400 (the original style) external drives have been affected too. So if you absolutely need to use an external hard drive, it’s probably too early to upgrade to Panther.)
For now I don’t recommend using FileVault. In addition to problems wrangling a single large encrypted file, I’ve seen reports that FileVault’s Reclaim Disk Space feature can easily destroy data. If you’re concerned about security, it’s better to use something like PGP Disk.