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Restoring encrypted backup from OSX DVD
Yes, I've successfully recovered a system from an encrypted sparsebundle.
The problem was kinda interesting and nerve-racking at the time, but only because OS X doesn't walk you through it.
What you need to do is proceed through the recovery prompts until it asks you to select a location of the Time Machine backup. At this point, select the NAS so that the graphical install interface mounts the NAS sharepoint (let's say this is /Volumes/timemachine). But it won't see your Time Machine backup, because it's encrypted inside mymac_MACaddress.sparsebundle. But since the volume on the network is mounted, we can do this through the terminal.
Open Terminal from the Utilities menu, and then do:
hdiutil attach /Volumes/timemachine/mymac_MACaddress.sparsebundle
This will prompt you for the password; enter it, and then return to the graphical installer. The recovery option should now show that Time Machine Backup or whatever the name of your backup container within the encrypted sparsebundle is a restore option. Sometimes, I've seen this as a blank line listed alongside other disks. Other times, I've had to Go Back in the recovery process and then proceed again through it until it asks to pick the source. But it should show up, and then restore as normal.
My work requires me to have disk encryption on my laptop, but I hate that FileVault is so heavy when it's backed up. I switched to full disk encryption and use an encrypted sparsebundle to receive my TM backups hourly now. It's fantastic, and the space savings, convenience, and the live-backup-without-logout over FileVault are a real winner.
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