At the moment (22.12.3.1), if you encrypt the root/parent dataset in a pool, and then install the apps into that pool it will create the ‘ix-applications’ dataset as unencrypted. That dataset being created unencrypted during app setup is by current design. However, having an unencrypted dataset as a child of an encrypted dataset is a bad practice/broken scenario that breaks things like replication. However, the only warning you have that you are going to put yourself in this scenario comes after some health check job fires after you’ve gotten yourself into this state, and there isn’t a good migration path out of it (save tearing it out and starting over).
I have stepped on several other proverbial landmines, but this is the strangest one so far. But, I don’t want to derail too hard here.