This bug was fixed in the package user-setup - 1.42ubuntu3

---------------
user-setup (1.42ubuntu3) precise; urgency=low

  * user-setup-apply:
    - Revert the change from 1.42ubuntu2.  We'll handle this in ubiquity
      instead; in d-i, it seems to be too difficult to get right without the
      aid of script libraries from cryptsetup.
    - If OVERRIDE_ALREADY_ENCRYPTED_SWAP is set in the environment, assume
      that encrypted swap has already been set up rather than re-creating
      and re-zeroing swap (LP: #979350).
 -- Colin Watson <[email protected]>   Thu, 19 Apr 2012 02:46:54 +0100

** Changed in: user-setup (Ubuntu Precise)
       Status: Triaged => Fix Released

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https://bugs.launchpad.net/bugs/979350

Title:
  install with encrypted home failed near the end: OSError: [Errno 12]
  Cannot allocate memory

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