How does File Vault 2 handle a Windows 7 virtual machine
Filevault 2 encryption happens on the fly while the system is running.

It does not affect a specific process or application. However, it does affect the I/O performance to the disk. Because Virtual Machines have a lot of read/write operations to the hard drive, the Machine will start slower when loading from the disk.

I have 15GB Virtual Box image for Ubuntu 11.10. It runs very good because my CPU supports the New AES Instructions for accelerated encryption which Filevault 2 makes use of.

In answer to your question:


As long as you still have 10-15% of total free space on your hard disk, Filevault 2 will handle any large VM.
But, I've looked up the Intel processors used in the 2010 Macbook air models. Unfortunately, none of them support the accelerated encryption!


Because your Macbook Air is not very powerful, I do not recommend using VMs in Filevault 2, or Filevault 2 at all, if you don't really need it.
Enabling Filvault 2 will cause large drops in reading/writing speeds to your flash drive without accelerated encryption.



Also see:


Intel® Advanced Encryption Standard (AES)
Filevault 2