Confused about Nexus 7 failing system update to 4.2
I'm getting the same problem and have not encrypted my nexus 7's storage (but it is rooted). Any luck? I've attempted to update it several times with no success. 

To reset the "check for updates" and allow you to attempt the update again, try the following:
In Settings > Apps > All (tab), search for Google Services Framework, clear it's data and kill it. Then go to Settings > About tablet > System Update, and it will find the update.