Installing Lubuntu 16.10 with Encrytion
Solution 1:
It's an installer bug.
Choose the "Try Lubuntu" option from the boot menu so that you get a working desktop.
Choose "start menu" -> "system tools" -> "LXTerminal"
At the console prompt, type:
sudo apt-get install lvm2
Then run the installer icon from the desktop ("Install Lubuntu 16.10").
Clearly no-one tested any installation method that uses lvm.
Solution 2:
OK, it seems to be a version related bug. Using the common 16.04. Lubuntu installer is working.