I have an LG GT540 Optimus with Android.
How can I encrypt all my filesystems to ensure that if it gets stolen, no one will get my passwords, contacts, etc.. :\ ?
From my post to the link GAThrawn called out; Encrypt the phone's internal storage
Android 3 (Honeycomb) offers full system encryption natively. However, as it's only for tablets at this point I will post some other avenues.
There was some work done on this for the G1 using LUKS and Cryptsetup. I think I've seen this on a moto droid rom too, but you'll definitely need root. It is not trivial to do, and there isn't too much interest so popular roms like Cyanogenmod don't provide for this natively.
There are some apps in the market that support encrypted file stores (check out Lock Files. I have no idea how transparent that is on the system however.
To your italicized point on remote wipe. There are MANY solutions for this. If you're using Exchange you can push this with ActiveSync, if not apps like Lookout, and more provide remote wipe and other functions. There are even manual ways w/ dyndns and a listening SSH server.