Time Machine wants to decrypt the backup volume
The thing you struggle with is that you have a misconception that the encryption of the backup is separate from the encryption of the volume - it's not.

I.e. when you do encrypted Time Machine backups, the volume is encrypted - and that's the only encryption that exists.

So either you have encrypted Time Machine backup via an encrypted volume, or you have a non-encrypted Time Machine backup on a non-encrypted volume.

All in all this means that if you click "Turn Off Encryption", you're removing the encryption on the volume, which is not what you want. You basically already have the setup you're looking for which is an encrypted volume.