The latest version of initscripts (0.8) swaps the setting up of encrypted partitions and the detection of lvm groups. Previously, encrypted partitions were set up, followed by lvm groups. This meant that encrypting lvm groups required encrypting the underlying physical volumes.

Now, lvm groups are scanned for before encrypted partitions are set up. So encrypting lvm groups requires encrypting the logical volumes. This breaks any existing setups where the physical volumes are encrypted, since the physical volumes won't be available until after they have been scanned for.

One possible solution would be to scan for volume groups both before and after the encryption setup code.