I am surprised that they didn't keylog his machine - as having a warrant to search/seize means a warrant to keylog probably could have been obtained.
The police will learn from this and avoid these 'oh dammit' moments by just keylogging everybody from now (or at least those suspected of having encrypted volumes).
Keylogging is the one real weakness of all the TrueCrypt/other encryption schemes (that and your password is in memory in the clear while the volume is mounted, and even afterwards depending on your settings).
You wouldn't re-encrypt the whole drive; usually, the master key is stored in the first few sectors of the disk, encrypted with the login key. That way, you only have to re-encrypt a small amount of data to effectively change the entire disk's key.
Adding a keylogger (presumably hardware) is not without its risks. If the suspect discovers it, they have a window of opportunity to cover their tracks.
The police will learn from this and avoid these 'oh dammit' moments by just keylogging everybody from now (or at least those suspected of having encrypted volumes).
Keylogging is the one real weakness of all the TrueCrypt/other encryption schemes (that and your password is in memory in the clear while the volume is mounted, and even afterwards depending on your settings).