It's a GUI problem in Kubuntus Installer. Here is a workaround:

1) click the radiobutton for the guided install with encryption and enter your 
password.
2) select manual partitioning 
3) create your /boot partition with your desired filesystem and a physical 
crypto volume. on which you create your root filesystem

the password fields seem to be connected to the guided install but they
are used globally. They seem greyed out but thats just a visual problem.
The Password field is used whether you entered something or not.

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https://bugs.launchpad.net/bugs/1242847

Title:
  Kubuntu setup / install encryption keyfile creation failure when
  setting up luks

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