Lion - Filevault2

Hi,
I've been having issues with filevault2. My machine behaves "normally" except everytime I try and turn filevault on I get the errors outlined below.
I am able to boot into recovery mode. I have done a clean install but still I am unable to turn filevault on. I'm using a mid 2010 2.66 GHz machine with 8GB of RAM. The software is up to date and is 10.7.5.
Any suggestions?
Thanks,
1/29/13 11:04:01.000 AM
kernel
jnl: unknown-dev: flushing fs disk buffer returned 0x5
1/29/13 11:04:01.000 AM
kernel
jnl: unknown-dev: flushing fs disk buffer returned 0x5
1/29/13 11:04:06.585 AM
authorizationhost
SFBuiltinEntitled: System Preferences.app is not entitled for system.preferences.security.remotepair
1/29/13 11:04:08.304 AM
[0x0-0x12012].com.apple.systempreferences
System Preferences(178,0x110624000) malloc: *** auto malloc[178]: error: GC operation on unregistered thread. Thread registered implicitly. Break on auto_zone_thread_registration_error() to debug.
1/29/13 11:04:33.236 AM
fseventsd
Logging disabled completely for device:1: /Volumes/Recovery HD
1/29/13 11:04:34.000 AM
kernel
jnl: disk0s3: flushing fs disk buffer returned 0x5
1/29/13 11:04:34.000 AM
kernel
hfs_truncatefs: shrank "OSXBackup" to 39888625 blocks (was 39966450 blocks)
1/29/13 11:04:47.009 AM
diskmanagementd
DM ->T-[DMToolBootPreference addAndBlessBootRootSystemToBooterDisk:mainOS:]: inBooterDiskUDS=0x102b85c90=disk0s3=Recovery HD inMainOSUDS=0x7fb70a5075f8=disk0s2=OSXBackup
1/29/13 11:04:47.009 AM
diskmanagementd
DM ..T-[DMToolBootPreference addAndBlessBootRootSystemToBooterDisk:mainOS:]: main OS MP URL=file://localhost/
1/29/13 11:04:47.009 AM
diskmanagementd
DM ..T-[DMToolBootPreference addAndBlessBootRootSystemToBooterDisk:mainOS:]: bef BRCopyBootFiles srcOS=dstOS=file://localhost/ dstBOOTER=disk0s3 opts={
1/29/13 11:04:47.187 AM
fseventsd
Logging disabled completely for device:1: /Volumes/Recovery HD
1/29/13 11:04:51.319 AM
com.apple.diskmanagementd
WARNING: /System/Library/CoreServices/.disk_label: owner not root!
1/29/13 11:04:51.853 AM
com.apple.diskmanagementd
disk0s3 didn't unmount, leaving mounted
1/29/13 11:04:51.868 AM
diskmanagementd
DM ..T-[DMToolBootPreference addAndBlessBootRootSystemToBooterDisk:mainOS:]: aft BRCopyBootFiles err=0
1/29/13 11:04:51.868 AM
diskmanagementd
DM <-T-[DMToolBootPreference addAndBlessBootRootSystemToBooterDisk:mainOS:]: retErr=0
1/29/13 11:04:52.000 AM
kernel
jnl: disk0s3: flushing fs disk buffer returned 0x5
1/29/13 11:04:52.396 AM
diskmanagementd
DM ->T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: inPhyDiskUDS=0x7fb70a5075f8=disk0s2=OSXBackup
1/29/13 11:04:52.641 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: disk=0x7fb70a5075f8=disk0s2=OSXBackup has a RecoveryOS dir on disk=0x102b85990=disk0s3=Recovery HD volname=Recovery HD
1/29/13 11:04:52.728 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: did mount nobrowse; MP=/Volumes/Recovery HD OMS=0x7fb70a607380
1/29/13 11:04:52.728 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: recoveryOSDirPath=/Volumes/Recovery HD/com.apple.recovery.boot recoveryOSBootEFIProgramPath=/Volumes/Recovery HD/com.apple.recovery.boot/boot.efi
1/29/13 11:04:52.776 AM
fseventsd
Logging disabled completely for device:1: /Volumes/Recovery HD
1/29/13 11:04:52.794 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: did blessFolder; err=0
1/29/13 11:04:52.794 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: at exit sequence
1/29/13 11:04:52.845 AM
diskmanagementd
DM ..T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]: did if-needed-best-effort unmount
1/29/13 11:04:52.845 AM
diskmanagementd
DM <-T-[DMToolBootPreference blessRecoverySystemIfAnyAssociatedWithPhysicalDisk:]
1/29/13 11:04:52.904 AM
System Preferences
*** CoreStorage conversion failed with mainError: -69886; detailError: 0
1/29/13 11:04:53.000 AM
kernel
jnl: disk0s3: flushing fs disk buffer returned 0x5
1/29/13 11:04:53.000 AM
kernel
hfs_extendfs: will extend "OSXBackup" by 77825 blocks
1/29/13 11:04:53.000 AM
kernel
hfs_extendfs: extended "OSXBackup" to 39966450 blocks (was 39888625 blocks)

AFAIK, FV 2 encrypts the entire disk. Check out the returns from a google search for filevault 2 site:apple.com, especially http://www.reedcorner.net/guides/macvirus/

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