Yes, but in that case, why not a less intrusive way? The icons are nice for quick selection of channels.
Someone else has done the legwork: Channel logos, padlock - #20 by V4n1X
<variable name="PVRChannelIcon">
<!-- <value condition="ListItem.IsEncrypted">pvr/encrypted.png</value>-->
<value>$INFO[ListItem.Thumb]</value>
</variable>
<variable name="PVRChannelIconDialogOSD">
<!-- <value condition="Container(11).ListItem.IsEncrypted">pvr/encrypted.png</value> -->
<value>$INFO[Container(11).ListItem.Thumb]</value>
</variable>
Commenting out those two lines fixes the issue.