I used to have Packet8 for a year. Never had any major problems with it. Voice quality was no different than a POTS line. As far as encryption, I don't think any of the VOIP providers provide it. However, VOIP calls are probably harder to tap into than a POTS line because you have packets traveling all over the country instead of a a dedicated line to a central office.
Bandwidth was never a problem for me. I use earthlink cable and I could talk, play WoW, iChat and have 3 other computers on the network using the internet with no problems.
I switched back to a POTS line though because I needed reliable service for my fax machine and Tivo.