OK, it looks like I also needed to remove "quiet" from the boot
arguments to see what was really going on.  On both systems, before it
hangs waiting for the timeout, the last messages are:

Begin: Running /scripts/init-premount ...
Done.
Begin: Mounting root file system... ...
Begin: Running /scripts/local-top ...
Begin: Waiting for encrypted source device... ...

-- 
Karmic update "Waiting for encrypted source device..." error
https://bugs.launchpad.net/bugs/446591
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