Hmm... With further testing, I'm now realizing that if you mistype your password, DD will accept it and just back up with a different password. But if you enter spaces as your password, it will switch to unencrypted backups as you have.
It sounds even less likely that you entered spaces as your password. So I think the behavior I describe about passwords is a separate (but also bad) bug. I'm suspecting there is another way to end up with a switch unencrypted backups that I haven't discovered yet.
Hmm... With further testing, I'm now realizing that if you mistype your password, DD will accept it and just back up with a different password. But if you enter spaces as your password, it will switch to unencrypted backups as you have.
It sounds even less likely that you entered spaces as your password. So I think the behavior I describe about passwords is a separate (but also bad) bug. I'm suspecting there is another way to end up with a switch unencrypted backups that I haven't discovered yet.