IOS upgrade 5.0.1 iPad failed at Enter the password to unlock backup

I upgraded iTunes on my MacBook (Leopard), then attempted to upgrade iOS on my iPad2 from the original iOS it came with (4.x). Everything seemed to go fine until it was attempting to put itself back together from the backup taken just before the upgrade. I haven't been able to give it the right password.
I believe I had set backups to be encrypted. But people who didn't also seem to have trouble with this. I've tried lots of possible passwords (for the account on the MacBook I was using, the admin account on it, current appleid, old appleid, 4 digit numbers that I use for accounts that require 4-digit numbers, a few items from keychain), to no avail.
Need help with three questions (at least!)
1. I am confused about what password would be used to unlock the encrypted files (is this a separate password? I no longer remember how it was set up, although I did it last spring). Some folks on forum suggested that the correct password might fail in this process, but changing the password might get it to  work. But I don't know which password or how. I usually record passwords in Data Vault, but don't have anything in there separately for iTunes or the iPad backup. Need to know whether I need to tear the house apart looking for a possible scrap of paper.
2. If I manage to find the right password, how do I get to the right backup? I had to cancel out of the form that was asking for the password in order to try anything else. Now when I try to restore from backup, the backup showing is not the right one (it is earlier). As a last resort I may have to try restoring from that one (assuming I can solve the password problem.)
3. I had synced all my applications and contacts before starting this. Can I get back most of my stuff from that? I didn't not have music, movies or many photos. Did have a few kindle and nook books.
I'm finding the whole process of managing the iPad with iTunes very confusing. Thanks in advance for any help.

This is what I would do.
1. Settings > General > Reset.> Erase All Content and Settings
2. Build the IPad 2 from Fresh and then Upgrade to Newest IOS.
3. Restore Application's Manually > App Store > One by One
4. Restore Contacts : If you use Gmail : Its Easy : through Itunes
Once All the Apps and Contacts are Synced : Would do a Backup.
5. Encrypt and Add a New Password.
6. Backup Again : So that you have 2 separate Restore Points.
Good luck, let me know if this helps.

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