Hi John,
Great to see your interested in running a relay! We are aiming to compensate no more than $100 per server and month, which is unlikely to cover all your costs. You will probably have to produce receipts showing your expenses, fronting up the money. We are not quite there yet, but I hope we can win you as someone you isn't in it just for the money, but also as a Friend of Tor who likes to become part of saving the world (a little).
I don't know about other operators, but Torservers.net deliberately keeps the boxes unencrypted. We already produce a lot of unnecessary tax money to be wasted every time police investigates a (lost) cause. From what we hear, encryption just makes them keep the hardware longer and not return it as soon as possible. We are talking worse case here anyway -- not too many operators have seen a seizure of equipment yet (we did, two last year, in the US).
I agree on the notion that it helps if operator and server are in different countries. Others may disagree, given that it complicates a hypothetical case in court and given that you need to know about the law in two countries.
It would be nice to have someone detailing how you exactly go about setting up an LLC. We set up a non-profit in Germany and I am happy to help anyone who is thinking about going the same route. An association here is much easier to set up than a company, and gives you similar results when it comes to liability.
Is there anything else I can help you with at this point in time?