Hi guys. I'm one of the ZNC devs. I used the pre-existing test/test account on these forums due to laziness.
The workaround to your issue would be to use these config options...
AppendTimestamp = true
PrependTimestamp = false
This way the timestamp will go after the +OK message and mircryption can do the right thing.
Another thing I should mention is that the *crypt module
was written to be compatible with mircryption's CBC mode and thus can be used on a trusted or local shell to provide client independent encryption.
Also, we have a pretty active support channel at #znc on efnet if you have any questions.