It works for me with my workaround applied, however your groups get
messed up on login due to this bug:
https://github.com/google/fscrypt/issues/77

I've mostly gotten away with that being broken but it causes weird
issues, including problems with snaps as well as anything that needs a
group (virt-manager, wireshark, etc).  And gnome-terminal is fine as a
terminal but other terminals are not because gnome-terminal runs under
the system-user session (using gnome-terminal-server) where as most
other terminals end up launched under the session context which has the
broken groups which means sudo is also broken in that case.

I am however using Xorg because of NVIDIA and not Wayland, I wonder if
that may have extra issues. Since your problems are display related.

You'd probably want to check "journalctl --user" as an initial log to
start with for clues.

In any case fscrypt is definitely broken out of the box, the groups
issue isn't fixed upstream but since your issue is fixed with upstream
fscrypt i'm not sure what issue you are running into.

** Bug watch added: github.com/google/fscrypt/issues #77
   https://github.com/google/fscrypt/issues/77

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https://bugs.launchpad.net/bugs/1768340

Title:
  fscrypt does not work for home directory encryption

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