Newly stabled sys-fs/cryptsetup-1.0.5 supports LUKS (and, as I heard shall replace sys-fs/cryptsetup-luks), but it installs the static cryptsetup binary into /sbin, not /bin. Genkernel does not handle this change of setup: * LUKS support requires static cryptsetup at /bin/cryptsetup * Not including LUKS supprot. Test with genkernel-3.4.9_pre6 and genkernel-3.4.9_pre9-r1.
And this is part of the reason that we're trying to move away from using files from the host system to include in the initramfs. I've applied a fix in SVN. It now looks for both /bin/cryptsetup and /sbin/cryptsetup. The error message now says: LUKS support requires static cryptsetup at /bin/cryptsetup or /sbin/cryptsetup
This should be done in 3.4.9_pre10 which will be hitting the tree soon.