This bug was fixed in the package busybox - 1:1.30.1-7ubuntu3

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busybox (1:1.30.1-7ubuntu3) jammy; urgency=medium

  * Add dirname from coreutils to the initramfs (LP: #1960083)

 -- William 'jawn-smith' Wilson <jawn-sm...@ubuntu.com>  Fri, 04 Feb
2022 16:10:23 -0600

** Changed in: busybox (Ubuntu)
       Status: Fix Committed => Fix Released

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https://bugs.launchpad.net/bugs/1960083

Title:
  dirname applet missing from initramfs

Status in busybox package in Ubuntu:
  Fix Released
Status in zfs-linux package in Ubuntu:
  Confirmed

Bug description:
  The initramfs is currently being built without the dirname applet.
  This is causing issues with zfs encrypted devices, as cryptsetup is
  attempting to use dirname to determine the location of the system key.
  This results in the following error:

  /init: line 971: dirname: not found

  followed by a prompt that is missing the zpool name. For example

  "Please unlock disk keystore-" rather than "Please unlock disk
  keystore-rpool".

  After entering the password, the user is dropped to an initramfs
  shell.

  It appears that this was caused by a change in cryptsetup to suddenly
  need dirname to function properly.

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