No its not your media. This error is from the system you are using to setup the drive with not being able to create the encrypted partition because its missing that kernel module (sha256.ko).
Are you using a debian machine to build from?
Also verify you have run this command from the Guide:
The sha256.ko is a kernel module which either should be part of the distro you are running or be installed by these packages (cryptsetup and dmsetup)
A knoppix live cd is capable of building the USB drive according to this guide so you might want to try that if you having problems on an existing system.
RE: Cryptsetup
No its not your media. This error is from the system you are using to setup the drive with not being able to create the encrypted partition because its missing that kernel module (sha256.ko).
Are you using a debian machine to build from?
Also verify you have run this command from the Guide:
apt-get install cryptsetup dmsetup parted debootstrap grub
The sha256.ko is a kernel module which either should be part of the distro you are running or be installed by these packages (cryptsetup and dmsetup)
A knoppix live cd is capable of building the USB drive according to this guide so you might want to try that if you having problems on an existing system.