I ran into this myself yesterday. I tried restarting it in Safe Mode (wait for chime, hold Shift key until you see the Apple and release) and then reinstalling.
No dice... when it went through to update it told me that it can't install to a disk that is encrypting. I never asked for the disk to be encrypted... but when I went to System Preferences and looked under FileVault... it said it was encrypting!!!
As of last night, the disk had over a day before it was going to be fully encrypted. I'll find out tonight...