We are starting to look at migrating our systems to Windows 7 from XP. I've been playing with MDT 2010 doing automated installs and using USMT. I haven't started looking at how migrating xp laptops with Guardian Edge encryption would work. Would the WinPE overwrite the MBR and hose the system? Is there a way to do an in-place migration to Windows 7 with an encrypted HDD, or should I backup the user state to a file share and treat the laptop as a "fresh" system?
Windows 7 uses a newer bootloader then Windows XP, so yes your MBR will be overwritten. Having done this in a lab environment, I can tell you that a reinstallation/reimage of Windows 7 onto a Guardian Edge Encrypted hard disk will result in a non-functioning boot volume and possible data loss.
Your best bet is to decrypt all hard drives, export user data, install Windows 7, restore user data, and re-encrypt. Also keep in mind there is no in-place upgrade of Windows XP to Windows 7 available. Additionally, you may need to upgrade Guardian Edge for Windows 7 compatibility.