Mac – Should I use time machine to migrate from one mac to another

No. Most technically minded people have stopped trying to hack together AFP as Apple have changed the code to tighten up and only show legitimate sources not connected as direct attach storage.

Apple provides two products that let Mac Clients see a hard drive as a Time Machine backup when they are not connected DAS but instead NAS (network attached storage) which facilitates the sharing of one drive with multiple macs simultaneously and without reconnecting cables:

1. TimeCapsule - only the internal drive is supported for Time Machine.
2. OS X Server - can mark any share point as being available for Time Machine use.

Yes, anything is possible in software given enough money, time or ingenuity, but for reasons I can only presume is enough smart people breaking TimeMachine and blaming Apple for lost data when using DIY Time Machine targets, this has been tightened up in Lion to preclude any easy solution that is documented at present on the internet from working.

To answer your first question about the keychain and whether you should encrypt backups: the passwords in your keychain are already encrypted, that's why you always have to type a password (by default your login password) to show stored passwords. So there's no immediate need to encrypt.

Of course, you could add Time Machine encryption to provide a further layer of security. This is possible starting with OS X Lion and Mountain Lion (from http://support.apple.com/kb/ht1427):

OS X Lion and Mountain Lion let you encrypt the Time Machine backup external drive using FileVault 2.

FileVault2 also uses your login password, though. So if the bad guys are able to guess or crack that password, they will have also access to your keychain information. Choosing different passwords for login and for accessing your keychain would protect the keychain passwords in such an event.

Either way, use strong passwords, password quality is of foremost importance to protect your data.

EDIT:

The OP asked in a comment how to set different passwords for login and keychain. Here is how:

• Open Utilities>Keychain Access.

• Right click each keychain and select 'Change Password for Keychain XYZ':

  

If you prefer to use your current password as keychain password and change your login password, log in using another account and change your account's password from System Preferences>Users & Groups. That will only change your login password, not your keychain password.