If you are using encryption on login it means that you are storing the passwords in an encrypted format in your db. If the passwords that exist are not stored like this then there is no need to have an encrypted login.
To make the login work with encryption you will first need to update your registration process so that you are inserted the encrypted version of the password for the user. If you have existing users you will need to make sure that you update the passwords that are in your db to be the sha1 encrypted version of that password.
If you register the user's yourself you could just update your registration page and re-register the existing users, this should get them to have an encrypted password in the db.