You’ll need at least a m3.medium instance to use EBS encryption (t1.micro doesn’t have the Intel AES-NI instruction set).

Since you’re now using m3.medium, you should use an updated ABI, such as ami-383a5008. ami-383a5008 is also HVM (vs paravirt), so you get more security isolation.

As a cost update, with Amazon’s current prices:
* EBS volume:
** $0.05 per GB-month of provisioned storage: My 30GB volume = $1.50/mo
** $0.05 per 1 million I/O requests: My volume had 14k I/Os, so $0.01/mo
* EC2 instance (m3.medium)
** $0.070 per m3.medium instance-hour (or partial hour): Took <2hrs to back up: $0.14

So my monthly cost was cut approximately in half from August 2012, due to (magnetic) EBS volume prices being cut in half. So 2014 costs are around $1.65/mo, again, mostly due to the 30GB EBS volume size.

Here’s a quick breakdown of costs for my setup. I use the US West (Oregon) region, and have a 30GB EBS volume that I back up to once a month:

* EBS volume:
** $0.10 per GB-month of provisioned storage: My 30GB volume = $3.00/mo
** $0.10 per 1 million I/O requests: My volume had 14k I/Os, so $0.01/mo
* EC2 instance (t1.micro)
** $0.020 per Micro Instance (t1.micro) instance-hour (or partial hour): Took <2hrs to back up: $0.04

So my monthly cost is around $3.05, mostly due to the 30GB EBS volume.

A 1TB volume would be $100/mo with these costs. Not bad considering the size.