I think the DailyDot is incorrect, or at least confused. There was never, to my knowledge, a way to enable any sort of device (full or not) encryption for the eReaders. (Kindle Whitepaper, DX, etc) The Android-based tablets? Yeah, and as the screenshot shows, Amazon no longer supports it. The only encryption I know of on the eReaders is the DRM for the ebooks themselves, which I doubt Amazon is too keen on removing any time soon.
What you’re saying sounds right to me, as well.
They’ve since updated the article and posted a correction at the bottom.