Would refusal to decrypt be contempt of court? If so, the penalties seem to be far more lenient than any of the crimes I can think of that one would want evidence of hidden. It may well be that savvy criminals would adopt strong encryption as a matter of course.
Yes, it'd be contempt of court if you disobeyed a court order to decrypt a drive. The contempt would very likely be preferable. It's not a felony after all.
It'd have to be better than what is on the drive - assuming you've got anything on the drive to begin with (some kind of incriminating evidence or something else they can build charges with). The difference might very well be that you prevent the prosecution from building a strong enough case, and at the least maybe you buy yourself some time to build a better defense.
I'd predict that as major crime continues to shift to the digital realm, criminals will adopt ever stronger encryption for that very reason, and the government will use that practice to argue in favor of violating more civil rights. Seems to be the trend these days.
IANAL, but isn't there something about the rules of evidence?
Like, the prosecution can't just say "we think he hid it on an encrypted HDD, but we aren't sure". The judge won't allow that. But if you claim to have forgotten the password, then the prosecution can speculate.