Back in the day there was ELE (Everything Leaves Encrypted) that attempted to utilize a livecd and Tor to encrypt all network traffic - but the same thing happened to it as it did to the Paranoid Linux attempt - Lack of support/time/resources to continue development.

As far as why... people who really need encryption already use it and/or are suspicious of a silver bullet solution. People who don't need it don't seem to care as much about it.