I have used FileVault in the past (it has been awhile) but I don't think it is an obstacle, as reformatting will wipe it out.
I'm wondering if the problem isn't stemming from your removal of your Bootcamp partition without using Bootcamp to do it. Not a Windows user, so I may be far wrong, but I seem to remember seeing some articles about serious trouble arising from that. Might be worth using Bootcamp to reestablish a single partition (I'll try to find the article I read and post a link, as I may be foggy on the details) and then use Disk Utility to reformat the drive.
EDIT: This may be obvious and unneccessary but on the off chance it will help, am posting the link
http://www.simplehelp.net/2009/01/26/how-to-delete-a-boot-camp-partition/
EDIT2: I may have misread the entire thread string (I assumed you hadn't used Bootcamp for removing the partition, now in rereading it, I'm not sure that was an accurate assumption).
EDIT3: FWIW I never run FileVault on my internal Hard Drive anymore, but have run File Vault and am currently running File Vault2 on external Hard Drives and have never had any difficulty in doing a reformat or had any requirement to decrypt first. And that was on Lion and now on Mountain Lion.