Disk Utility fails to create encrypted disk image

When creating a disk image using 256 bit encryption and a purely numeric password longer than 13 characters the following message appears:
Unable to create "ABC.dmg." (error -60008)
the error happens upon typing the 14th consecutive number into the Password field. I have created images under the same conditions in the past, Not sure if this is caused by Lion.

Looks like one of the drives is bad.
While it passed being zeored with Disk Utility, it failed about 15 minutes into a 'Certify' using SoftRAID.
Now waiting on a replacement drive from Newegg.

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