Source code enryption available in CW has nothing to do with MCU. Having CW PRO licence you enable encryption in project settings and compile. Instead of producing object o-files, CW compiler will produce encrypted source files which are not human readable and have file extension like *.c_e . You can give these encrypted files to your consumer and he will be able to compile them with CodeWarrior but won't be able to see C source or edit them.
MCU security is access prevention to flash and EEPROM. To enable MCU security you need to program byte at global address 3_FF0F with lowest order bits set to 00,01 or 11. See register FSEC description.