Here the same problem with the alternate 8.04 64bit version

After starting the encryption we see the progress bar going to 42% and
thats it...

/lib/partman/init.d/31md-devices is the last running proces in the list.
Killing the PID corrupt the install screen.

Encrypting with a password phrase works fine.

-- 
partitioner crashes with random encryption key.
https://bugs.launchpad.net/bugs/154502
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