Are you 100% sure the correct password is rejected?
Because then this is a bit other bug then I seen.

I use luks on this box, and since auto-executed cryptsetup-using script
that i written does nothing when executed from init.d, I have to run the
script (so - run cryptsetups luksOpen) manually - and then it works.

What if you try to mount the disc manually? What encryption are  you
using

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Upgrade to Karmic completely broke password prompt for cryptdisks at boot
https://bugs.launchpad.net/bugs/475293
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