to add bit more info, I am doing a clean install of 12.04 (both 32 and
64 bit) on a single primary partition, formatted as ext4. I select to
encrypt the home directory and then I get the screen mentioned above.

www.stooorage.com/show/1184/6048402_capture_26042012_164139.jpg

then I click [Continue anyway] button and installation seem to finish normally 
and everything works, so it is probably not broken but I don't know 100%.
The only thing I have unusual perhaps, is that I don't use swap partition on 
any of the computers. Not sure if that can have anything to do with the issue.

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https://bugs.launchpad.net/bugs/985526

Title:
  exit with error if encryption is selected

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