Why is Time Machine showing a "Preparing disk for decryption" progress bar?
Time Machine prepares the drive for storing backups when you set it up. This means, disrupting filesystem-level encryption that wasn't made by Time Machine. If you want encryption on top of Time Machine encryption, it has to be below the filesystem level, or you'll surely lose it in favor of Time Machine. If you want encrypted Time Machine backups, simply enable encrypted backups when setting up Time Machine instead of encrypting in Disk Utility.