Sure, in order to encode both sets of data into a single encrypted result would require more storage space, but that is a small price to pay for protection against self incrimination from our ever growing police and surveillance state.
The end of the article captures why this idea would be so effective, viz. "The authorities, however, said no testimony was needed from Rawls. Rather, they said, 'he can keep his passwords to himself' and 'produce his computer and hard drives in an unencrypted state.'"
It is absolutely true and valid that the government has the right to compel people to hand over evidence that they are KNOWN to possess (in the same way that legal discovery is essential to civil cases). The line the government is drawing between self-incrimination and forced cooperation in an investigation is they they don't want him to tell them the password or what is on the drives -- they simply want him to hand over the drives in an intelligible state. Thus, if one could decrypt the drives to an intelligible set of data but not the data they desire, then you would be complying with the court order and could not be held in contempt.
Can someone on HN who knows more about cryptography help poke holes in my idea?