Same issue here: I plug in the USB key with the encrypted partition
(/dev/sdb2 for example)  The password dialog pops up, and the partition
appears in the Nautilus Sidebar as "1.9 GB Encrypted Partition".  I put
in the password, and the partition disappears from the Nautilus sidebar.
The mapping appears (ls -l /dev/mapper shows the following:

crw-rw---- 1 root root  10, 62 2008-06-16 15:46 control
brw-rw---- 1 root disk 254,  0 2008-06-16 23:48 
luks_crypto_ba194f34-1122-4e41-a6dc-fc5e0b85edf4
[EMAIL PROTECTED] ~ $ 

If I try 'pmount /dev/sdb2' at the terminal, I get prompted (at the
terminal) for the LUKS password.

I noticed that another LUKS partition for which I allowed the password
to be stored permanently does get automounted when I plug in the USB
device it's on.  Could be the developers didn't test the case where the
user selects "Forget password immediately"?  Or maybe it's working
because the password was saved when the machine was running Feisty and
still works after the upgrade to Hardy?

-- 
Luks encrypted usb key does not mount
https://bugs.launchpad.net/bugs/202811
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