I'd recommend never purchasing extended warranties from stores... they are even more slimey than standard insurance companies when it comes to paying up.
I second the warning against Best Buy specifically as well. Not only is it a pretty crappy store in general ($20 for a USB cable? give me a...
I also recommend PGP.
If you truly need HIGH security, then the file size consideration should be waived. Much of the strength of encryption comes at a cost of additional storage space. Without increasing the file size at all (or using compression), the best you can get is a simple substitution...
