Hi there,
I have the same Problem on an MSI WInd Netbook. I upgraded from jaunty to 
karmic. With kernel 2.6.28-15 i am able to mount and open my encrypted 
luks-root. WIth kernel 2.6.31-14 system hangs while booting. Message: Waiting 
for encrypted source-device.

Any morge Information i can provide?

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[Karmic beta] System hangs at boot while "Starting init crypto disk"
https://bugs.launchpad.net/bugs/450620
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