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How can one know something exists if they don't have it?

I don't think the distinction the court is making here is particularly epistemological. The question isn't even directly about the specific evidence on the encrypted drive. It's about whether the act producing said evidence, itself, would be testimonial. If the prosecution "knows" you have this evidence, however — legally, of course — they came by that knowledge, then the act of producing it isn't testimonial. If they don't know of specific evidence, OTOH, then compelling you to produce any evidence you might have would be.

If, for example, you were dumb enough to admit to a third party that you keep the map showing where you buried the bodies on an encrypted drive, that person's testimony might be sufficient. Worse, you might have let slip that's where the data is while being interrogated. Or maybe the Customs agent saw a file named "XYZ Company Fraud.xls" the last time you came back from overseas, and now you're being prosecuted for defrauding XYZ Co. There are countless ways for the man to come by knowledge of the existence of a specific piece of evidence.

In the case of child porn, how about network logs from your ISP? Would this be enough? There's no way they can be sure that the images are stored on your disk. But digital traces are logged all over the place, so this is a very relevant point.

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