Actually, IPSec can be used to encrypt routing packets, and BGP is a protocol commonly used because it is unicast in nature and can work over multiple hops. There is some opinion that it is better to use BGP over IPSec than using BGP md5 authentication, although I don't know if it is being used much at the provider level (suspect not given performance overheads)
The reason that IPSec is incompatible with most interior protocols is that they are unicast/multicast (not supported by IPSec) and rely on the neighbor being directly attached. This is why GRE tunnels are commonly suggested as the solution. This also avoids the confusion that arises between the routing policy and crypto policy.
In a lot of different IOS versions, there were issues with same-interface switching and IPSec. It varies from IOS to IOS and model to model. One of the first things to try if this is happening to you is to turn off fast-switching on the relevant interfaces. Bear in mind that the more advanced features you try and combine on one router, the more likely you will find some issue. So if you're going to try to combine MPLS/CEF/IPSec/NAT/RPF/same interface routing be prepared to spend a lot of time talking to the TAC
