Can an ISP log which traffic is encrypted? Yes. VPN protocols have flags for encryption. It's trivial to log or block traffic with these flags.
Will they be likely to expend the resources on logging the fact that it's encrypted, and this person notice it, in a small town? Probably not, unless you're creating other problems such as high bandwidth usage.
If they noticed, what would they do about it? Many people use VPN for work, so unless they analyzed the destination IP, maybe nothing.
Might someone upstream, with more resources, in law enforcement or surveillance notice? Might they have jurisdiction or agreements with the VPN provider to surrender your logs and even packet captures? That's a separate question that has nothing to do with your ISP, but you might consider it a risk.
Depends largely on motivation: whether you're a person of interest, or have activities of interest. Since many hackers will use VPNs (despite that not everyone on a VPN is a hacker), it is an activity of interest to law enforcement. Their ability to access to monitoring it depends on where you are, where the VPN servers are located, etc. Doesn't mean they couldn't make your life difficult purely by lawyerly harassment. I don't know what your relationship is with your ISP guy. Obviously investigative annoyance is not the most common scenario, but anything is possible if you annoy someone with connections. Arguably socially engineering, er, making friends with the ISP could be the better option.