Appreciate all the work that's gone into TWRP, do wish the original post could get updated with this known issue however, would have saved me considerable time.
Anyway in case it's helpful, for me (and as at least one other has noted) TWRP 3.2.3-0-shamu.img does not fix the can't decrypt/encryption issue with LOS 15.1.x. I just installed it with lineage-15.1-20181106-nightly-shamu-signed.zip. I tried my password, 'default_password', encrypting with no password, no dice.
However thanks to Lothsahn
Originally Posted by Lothsahn
LOS did force encryption, so wiping userdata and flashing the update didn't work when I tried. It sounds like that may have changed recently based on the reddit posts. I have heard that if you install LOS14 first, and then upgrade to 15.1, it will work (and preserve encryption), but have not personally verified this..
I can confirm this workaround works, blow by blow is below, but tldr is:
Erase current encryption, install LOS 14 and boot to it, set your pin/pass to be used on startup, boot back to recovery entering pin/pass, do Advanced Wipe of the system/data/cache, install 15.1.x, boot LOS and specify previous pin/pass to use at startup, profit
Blow by blow:
I wiped data/removed current encryption done by LOS 15.1.x e.g.
Main TWRP menu Wipe
Chose Format Data and allowed to format
Returned to the previous menu, chose Advanced Wipe, selected the Cache and System partitions and wiped
Installed 14.1 specifically
lineage-14.1-20180324-microG-shamu.zip (which is what I use and happened to have around, I assume non microg LOS would work just fine)
Once in OS do nothing more than set a pin to be asked for at startup enable developer options, advanced reboot and go to recovery
It accepts my pin and decrypts fine
Do Advanced Wipe of the /system /data /cache
Install lineage-15.1-20181106-nightly-shamu-signed.zip with gapps, addonsu, xposed
booted to 15..1.x and specified current pre-existing pin to use for encryption on startup
Later changed it numerous times with no issue in TWRP
Since doing the above I've had no issues doing the normal things like backing up, restoring and so on.
Hope this helps someone else and thanks again to Lothsahn and others who've shared here.