Why won't FileVault let me set a key?

This is (from my prospective) quite bizarre. I have a late 2010 Macbook Air which received liquid damage on Dec. 25, 2011 and was repaired (for $784) by Apple in Janurary. When I got it back they had replaced the hard drive and there was a fresh installation of OS X.
I went to turn on FileVault as usual, and it told me "A recovery key has been set by your school, group, or institution"....?!?!?. This was more than a little bit concerning because I don't have a school, group, or institution. At least not one that has anything to do with my Macbook Air!
I was not thrilled and tried calling Apple, but they said I would have to buy AppleCare to ask a question so I just gave up.
Now, fast forward 3 months. I have an actual serious need for the encryption because I an analyzing a confidential national longitudinal data set with personally identifible information on tens of thousands of people, including minors (for my dissertation). Encryption is actually required in the contract I signed. So at the suggestion of my college's IRC group, I tried reinstalling the OS again. It STILL gives that same message!
Does anyone have a clue what's going on?

I made a Genius bar appointment, and he was puzzled too, but escalated it via his channels and came back with this reply:
After a couple of exchanges with our engineering team they have recommended two things you may try.
The first solution is as follows:
Disable FileVault
In the system directory, go to "/Library/Keychains"
Move the files "FileVaultMaster.keychain" and "FileVaultMaster.cer" to the Trash. Deleting the files should then allow you to enable FileVault on the system and provide a recovery key. Refer to article http://support.apple.com/kb/HT5077 if you have questions regarding the location of the files.
Second solution:
Performing an erase and reinstall of the computer system will reset the master password and allow you to encrypt the drive again.
Obviously I picked the first solution. It is re-encrypting my disk at the moment, but I did get a recovery key before it started doing so.

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Why won't FileVault let me set a key?

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