This bug was fixed in the package upstart - 1.3-0ubuntu12

---------------
upstart (1.3-0ubuntu12) oneiric-proposed; urgency=low

  * init/main.c: restore the fix for bug #540256; we know the console setup
    is taken care of by plymouth in Ubuntu, so upstart changing the console
    settings just makes trouble (such as turning echo back on when it
    shouldn't be).  LP: #876626.
 -- Steve Langasek <steve.langa...@ubuntu.com>   Tue, 24 Apr 2012 13:16:43 -0700

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https://bugs.launchpad.net/bugs/876626

Title:
  Unlocking the second crypto disk (/home) echos password on console

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