Is there anyway to install Whonix Workstation and Gateway on separate, encrypted volume or ( if it’s not possible ) run Whonix Workstation with encrypted HOME folder? Because by default I can use it only after placing the virtual machines on the root subfolder ( what I would like to avoid )
Yes you can run both VM on an encrypted volume without problem.
You just have to move the uncompressed VM files into the encrypted volume and adjust their new location in virt-manager (so instead of moving them to
/var/lib/libvirt/images you would move them into your encrypted volume).