I see what you're asking and I don't remember seeing it go to the Client's disk when we did our testing with the Encryption feature. I do know that encryption via Veritas is PAINFUL and will DOUBLE your backup time and peg your processor.
I'm not sure what your environment is like, but if backup time is an issue for you, consider an APPLIANCE that does encryption on the fly, and avoid software encryption at all costs.
Got a little off topic of disk space.... sorry, just trying to add some insight.