I think this may have been the result of user error. I was messing around with loading a secret key from my list of keys, but now looking at the keys again, it seems that the key was set as the same as my primary.

This would explain why it didn't seem to work (I was logging in with the same identity as before) and why it was then requiring me to set a local encryption key.

Nostrudel appears to be doing everything exactly as it should and the problem was between they keyboard and the chair.