Bruce Schneier has another take on the issue, arguing that the military made the right choice not to encrypt. Schneier makes two points: (1) encryption is not the problem; key management is; (2) it’s not much of a concern whether the enemy can eavesdrop on the video feed. The second point seems right to me — it is no secret what areas the UAVs are monitoring, so it doesn’t really matter whether others can see the video. As for the first point, I agree to an extent: just to illustrate the point, consider that although it may be cheap to add encryption to the UAV, doing so would require providing decryption capability to everyone in the field looking at the feed; I have no idea how expensive or difficult that would be. On the other hand, the first point also reflects some of the endemic problems the military has in dealing with crypto in general.
More reading here.