Password protected and Passwords are seperate.
If the USB key is encrypted, it should work just fine as it would only encrypt the file once it was placed on the drive, the Printer itself has no part in that. Quickest test is to plug in an Encrypted USB stick and verify the printer sees it as a drive, if it does you are good to go.
Now if the file in question is to be password protected as well, that is not an option for scanning unless it is being sent to email. (This applies to Connectkey devices, I don't know about the Phaser)