obscuring email addresses in user to user email conversation
I think this is perfectly possible, though out of the scope of Drupal to some extent. Drupal can set from and reply_to headers in the mails sent out to, eg "John Doe &lt;abc@mydomain.com&gt;". You'd have to then set up a mail service on the domain which would receive any replies and forward them to the correct users. How you would configure the mail service is a matter for another forum, I think.

(I suggest you edit the original question to make it about obscuring or masking the original email address rather than encrypting it. What you describe is not really encryption.)