Confirmed in a recent test of an 8.04 release candidate.  The problem
seems to be that cryptsetup looks for the device (and gives up) before
USB detection has taken place.  I booted with break=top, manually loaded
the necessary modules to detect my USB disk, and then exited.  The
result was a successful boot.

** Changed in: cryptsetup (Ubuntu)
   Importance: Undecided => Medium
       Status: New => Triaged

** Summary changed:

- Ubuntu Hardy Alpha 5 with encrypted root install to USB fails to produce 
bootable system
+ cryptsetup fails to find encrypted volume on a USB storage device

** Description changed:

  Environment: 
  Ubuntu 8.04 Alpha 5, Alternate CD installer. 
  
  Installing to a USB hard drive with the following:
  
  200 MB boot partition 1
  159 GB encrypted root partition 2
  
  Manual partition. (not guided)
  
  After installation, cryptsetup cannot find the root partition. 
  Message: 
  cryptsetup: source device /dev/disk/by-uuid/xxxxxxxxxxxxxxxxxxxxxxxx not found
  
  Examining /etc/cryptsetup - it is pointing to the correct uuid on
  partition 2.
  
- It is probably a timing issue which has never been successfully resolved
- in cryptsetup. It needs to wait for the USB drive to become ready, and
- previous attempts to fix this problem in /usr/share/initramfs-
- tools/scripts/local-top/cryptroot with /sbin/udevadm settle --timeout=30
- have NOT been sucessful.
+ Booting with break=top and manually loading the necessary modules before
+ continuing gets this working, so it seems to be a race and may affect
+ other storage devices which are slow to detect.

-- 
cryptsetup fails to find encrypted volume on a USB storage device
https://bugs.launchpad.net/bugs/195464
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