Is Encrypted Email Discoverable?

Yes-- at least on the server side.
In a recent federal drug trafficking case (.pdf), the USDC for the Eastern District of Calif. was able to convince a Canadian court to issue an order granting the U.S. Drug Enforcement Administration access to clear text copies of encrypted emails sent through a Canadian email service called Hushmail ...

The defendant in this case allegedly used Hushmail as a communication tool to procure and sell anabolic steroids, a controlled substance. According to a Wired Blog Network post, Hushmail's Chief Technology Officer Brian Smith indicated the key technology issue is that Hushmail's email encryption service is performed on the company's email servers involving a non-Java configuration. This requires that users place a higher level of trust in Hushmail's servers as a trade off for the better usability they get from not having to install Java and load an applet on their own PC (excerpt from The Register Hushmail open to Feds with court orders)

Although the incident illustrates that encrypted email designed for the security-conscious can be decrypted based on a court order, it is unclear on whether a client-side Java-based encryption operation such as Pooka would have been equally applicable in this case.