Mounting encrypted filesystems in files using loopdevice works, but I do things differently than you.
Could it be a timing problem ? If what you do is run in a script, you are mounting and unmounting the loop device in quick succession.It looks like mount has been replaced with an unpatched mount from utils-linux. The patch comes from the loop-aes sources v1.x, or the binary from the debian mount-aes-utils package. Without the patch mount can't use the shorthand /etc/fstab line to call losetup for you.
BUT you shouldn't be using loop-aes v1.x anyway (I've posted this several times before)!
It's very insecure, its author says so. He also says not to use it! Use loop-aes v3.x in dsl-n.
To move your data:
Back up your plaintext in case somthing goes wrong. Create a new (other) encrypted partition using loop-aes v3.x in dsl-n, mount your loop-aes v1 partitions in loop-aes v.3.x, and copy your data fron the old encrypted mounted partition to the new. Then umount your old encrypted partition and *shred* the old device, many times for good measure.
Don't try to mount loop-aes v3.x encrypted partitions in loop-aes v1.x - it's not backward-compatible - you will probably bork them and lose your plaintext data.
Don't ever use single key loop-aes. Only use gpg-encrypted multikey - see the loop-aes readme.
I have a working loop-aes v3.x extension for dsl which I'll post soon (testing), and it includes the patched mount binary. I didn't know there was any demand.
original here.