Ok this may sound like a stupid question but is it possible for someone to install a small version of Linux on to a hard drive that would boot and then load Windows/Linux and intercept, log, or monitor all activity to hard drive from the OS it loaded.

For Linux you wouldn't need to load another Linux to monitor everything unless you have specific reqs I guess. For wintendo some form of virtualisation could work. Any particular reason why?

The reason I was asking is because I was trying to see if it was at all possible to create a small Linux installation to put on my computer to act as an encryption/decryption for the hard drive that would be able to encrypt the drive and load the other operation system.

I do know it is possible to encrypt the root file system on Linux, but with this if would work with loop-aes or something I could encrypt a disk with Windows on it to then load Windows.

I know that there are some applications that have been developed to do this with windows but all that I found where commercial versions and in most cases I don’t trust a commercial version as much as an open source version, and a lot of the time they let you recover a lost passwords and is see that as defeating the purpose.