Yes; of course it does.
When you log into a system, you expect to use the system. All the data in the system becomes human-readable, and of course non-encrypted.
That's what happens when you encrypt a full disk at once, yes. This is a useful tool for protecting from stolen drives, and it might even be what the author was thinking of when they mentioned "encryption". And just like the author said, it would have been inadequate to prevent this kind of attack.
But that's not the only way to implement encryption, and it's not the way that people are calling for here. Whether or not the disk is encrypted, individual files can be encrypted too. Thus, even when disk-level encryption is undone (so that the user can access the system), the file-level encryption is still in place. This is, at a bare minimum, what should have been in place here; there are ways to do even better, but this would have stopped the attack in question.