Disk utility doesn't encrypt

Disk utility will create a custom disk image on my external HD, but won't encrypt it. I've followed the instructions step-by-step for creating a secure, encrypted disk image several times and it always ends up the same: the disk image is created in the right place with the right name and size, but it doesn't require a password to open it. What am I missing here?

Don't put the password in the Keychain. If it's already there, open Keychain Access and delete that image's entry.
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