I run with File Vault turned on since my MacBook Pro could easily disappear if I’m not careful. I was using it fine earlier today, but the system froze up (trying to install Vista in Parallels) and I had no choice but to power down and start it up again. In the past, this hasn’t been an issue, but now I can’t log into my system again. Typing in the correct password would just freeze the system, and when I tried to use the Master Password to try and reset the password it won’t accept anything I type in.
Do you have a second user ID you could log in as? If not, do you have a second Mac system handy? If so, you could hook it up via Firewire and boot in disk target mode.
In either case, if you can get at the filesystem somehow, you can try poking at the encrypted disk image (should be in either /Users/you/you.sparseimage or /Users/.you/you.sparseimage) with the hdiutil program.
Otherwise…you might be out of luck. I’ve heard a handful of reports of people losing their FileVault images entirely in cases like these. Backup, backup, backup!
FileVault’s fragility has something to do with the combination of it being both encrypted and a sparse disk image, from what I’ve heard. Creating a separate fixed-size encrypted disk image and mounting that somewhere seems to be more reliable.
I still use FileVault on my iBook, since it’s convenient and I’m forgetful, but I make sure I keep it backed up on a regular basis by dumping my home directory to another machine.