Should I have turned off Legacy FileVault before using FileVault 2 on Lion?
You are correct with your assumption that there is a "double-encryption" occurring. This of course has the result of causing a lot of drive thrashing to occur. Having previously had to fix numerous corrupt FileVaults, I would first back up the sparsebundle. Once that is complete, I would then disable Legacy FileVault. 

Ultimately, the only real reason to maintain this setup is if there is reason to suspect there are others who possess login credentials (especially admin credentials) and are capable of mischievous behavior. Even under that scenario, my recommendation would be to encrypt the files which need to be kept secret using TrueCrypt and disable Legacy FileVault.