Change the command to :-

Code:
sudo mount .... -o encryption=aes,keybits=256,loop
Or you can use the method which is used in minirt.gz :-

Code:
# echo "passphrase" | losetup -p 0 -e aes -k 256 /dev/loop2 knoppix-data.aes
# mount /dev/loop2 /media/data