Even if it worked perfectly, it wouldn't be very useful. 

But it won't work perfectly, because we don't have any method of authentication. The bitcoin network is trivially MITMable. It's designed to work even in the face of that, but any encryption we implement will just get blown away by anyone who cares enough to stand in the middle of two nodes.

As far as I can see, we get a microscopic obfuscatory advantage over a very weak passive attacker, at the cost of hugely increased software complexity (and possibly increased CPU time).

So again; what do we hope to achieve? Why bother? Not a lot of sensitive information is transmitted in the clear. The little information that might be considered sensitive is better protected by anonymization (a la Tor), not encryption.