I've started a new Wiki page for this process
http://code.google.com/p/csharp-sqlite/wiki/ENCRYPTION
Encrypting your database is a 3 step process
1) Compile with SQLITE_HAS_CODEC
2) Activate encryption with a pragma command similar to:
PRAGMA hexkey="0x0102030405060708090a0b0c0d0e0f10"
Note: Your password is the 32 byte hexkey prefixed with 0x
3) Open or attach the database
Noah