You originally said the data on your HDD was encrypted using pgp. You were then advised to copy the data to an external HDD using either Carbon Copy Cloner os SuperDuper. For all intent and purposes both of these do the same job, namely make an identical clone of data on one HDD and copy it to another. The fact that the data is encrypted should make no difference.
You then say you've unsuccessfully tried to create an encrypted image to contain your data on an external HDD using Disc Utility. As already explained, there is nothing wrong with this procedure, however, this failed because, as Disc Utility reported, the image you created was not large enough.
Obviously, if you want to use Disc Utility, you'll need to determine the amount of the data you want to backup - this will ensure the size of the encrypted image you create to hold the data is large enough. Go to Disc Utility>file and follow instructions.
Disc Utility takes quite a while to create an large image so be patient! Third party software is available that is a lot quicker. However
as your data is already encrypted, I can't understand why you don't use Carbon Copy Cloner or SuperDuper. Why try to encrypt a file that is already encrypted?