To the best of my knowledge, there is nothing available that you can plug into the database engine to do encryption. If you interested in protecting the data as it goes across the wire, take a look at the Multiprotocol net library. It can do this.

Extended Stored Procedures are functions which reside in .DLLs and have been registered with SQL Server. SQL Server then exposed the functions as stored procedures. Not every .DLL can be registered. Take a look at the topic Extended Stored Procedure Programming in the BOL.

-Mike