Not enough space to migrate from Legacy FileVault to FileVault 2

When I try to change from using Legacy FileVault to the new FileVault in Lion, it says that I don't have enough disk space.

What are my options besides having to delete bunch of files? (20 GB in my case.) Is there any way, for example, to hook up a a large capacity USB thumb drive and tell it to use it for temporary disk storage? What about an external drive?

I notice that for each 1 GB of files I delete in my User's folder, the amount of additional disk space I need to free is reduced by 2 GB. I'm guessing that this is because it would no longer need to copy that data to a temporary location.

I don't know of any way to remap another drive as a scratch space and, when it comes to data integrity I distrust complex solutions.

First, go ahead and clean all caches, and search and destroy old/duplicate/obsolete/redundant files and applications. I often find a lot of clutter, and uneeded installers, in my Download folder. Don't forget to empty the Trash. You might be pleasantly surprised at how much space you recover. Also see the excellent tip about recovering drive space by temporarily disabling Smart Sleep.

If that didn't free up enough space, solve this problem by copying one more of your larger files, for example in my case I might choose my Aperture Library, to an external drive. An alternative would be to copy a large directory. (In fact, the Aperture Library is a actually a directory structure bundle). Your choice of files should be influenced by what is simple (fewer files from fewer places) and will have the least impact on the system. For example, I would be reluctant to move my media files for fear of damaging their sometimes delicate links from the iTunes Library file. (This fear has been somewhat mitigated by iTunes Match, but still I'm cautious.)

Confession, I don't really have to copy this file because it's already on my SuperDuper! clone drive, and also backed up offsite for safety—so in reality, I would just check the integrity of those backups and proceed.

Use copy, not move. While I've never been bitten myself, the reports of problems moving large groups of files to an external drive, particularly when using Finder, are numerous enough to frighten me away from this bad practice. You need to check the integrity of your copy before proceeding.

Provided you already have another trusted (meaning verifyed), redundant, backup copy of the file(s)—you do, right?—you can now delete the file(s) from your main drive. If not, take the time to make another copy. A file doesn't exist until it exists in three places – Alex Lindsay, The Pixel Corps.

The rest should be self-apparent. Turn FileVault off. Copy the file(s) back to your main drive and again verify the integrity of the copied data. Activate FileVault 2—remembering to safeguard the recovery key.

Laborious, but safe and approved by Apple in that there's no voo-doo involved.

I just thought of a way to temporarily free up 2 GB - 8 GB, depending on the amount of RAM you have.

By default, Macs have Safe Sleep enabled, which occupies the same amount of space as your RAM. In other words, if you have 4 GB of RAM, it's taking up 4 GB of hard drive space. If you temporarily disable this feature, and delete the hibernation file, you can use that space during the migration process. You can then re-enable safe sleep. Using this tip in addition to @jaberg's suggestions can help free enough space so that the migration is possible.

TUAW has an article explaining safe sleep and how to disable it.

This article might help too: OS X: Changing Hibernation Mode