Regarding the SD card idea, I have been doing something similar but with a few improvements:
1. Instead of a camera flash card, get a USB keychain drive [also known as “thumb” drive or “jump” drive]. These are cheap, available in at least 4GB [capacity] and are darn near impossible to break. The USB models can be read by nearly any PC or Mac.
For encryption, I recommend using True Crypt. This program is free and has been well-tested in the computer security community, as its code and design are open source.
One nice thing about this program, is that it lets you create a single file that you can access like a drive. And the program is only one file which can be run from the USB drive without the need to install anything on the PC.
I have several copies of this distributed to friends, and I have an envelope with the key distributed to some family members. This way, either one losing the goods does not compromise my info. And nobody can access the data unless I put them in touch, or they get together because I’m stuck somewhere and need a replacement passport/etc.
Regarding the family photos, the best way to make a digital album of 1,000+ pictures is to get a good quality digital camera and a copy stand. You may have to peel back the clear page covers to get rid of the glare, but the results with a high-megapixel camera are pretty darn good. Scanning dozens of albums on a flatbed is just not feasible.
Once you have them scanned, make DVDs and send them to your family. Make it a Christmas present or something. If your house burns, you not have nothing irreplaceable.
Hope this helps! – JN, EMT