If you are using encryption your isp will not know what you are downloading. They will know from what ip, but not what. They are not going to capture every packet for a 4g multipart rar and try to decrypt it. The only people who know what you are downloading are those connected to you.
You should setup your bittorent client to update its tracker info using TOR, this way your isp is not recorded on the tracker.
You should download, and browse for torrent through tor, or some other anonymous proxy.
You should use peergaudian, peerblock, ipfiler.dat, etc, to block known bad ips
Also, in your client you should set the ip reported to the tracker to something bogus. Or if you want incoming and some privacy, setup a couple free domain accounts and chain them together to your ip. You could use dyndns.org and no-ip.com and other, just bounce it around a few times.
This is what I do. (I may be a little paranoid)
You also must remember that those being sued are being sued for uploading, not downloading. That is why the $ is so high. This makes usenet very attractive, and with encryption to keep your isp off your back. $10 bucks a month or so.