Does the system disk of an ECS instance support KMS encryption?

Yes. The system disk of an ECS instance supports KMS encryption by using the key that is automatically generated by KMS. Currently, support for BYOK encryption is in development.

Is KMS encryption supported by Terraform or Packer?

In Terraform, you can set the encrypted parameter to enable or disable KMS encryption. For more information, see Argument Reference. Currently, support for KMS encryption in Packer is in development.