I think the dog can truly find the drives in a lot of cases... and not just "find" them. But what justified the warrant for the dog to be there in the first place? Where does the parallel construction come in? You could only use the dog to "parallel construct" after you were already conducting an invasive search, and at that point you wouldn't actually need any parallel construction. So what does it do for you?
Anyway, suppose I'm a guilty person, and you're the cop, and you get a warrant for whatever reason, and your dog finds the drive with the details of my scheme to sell drugs to buy child porn for terrorists. Well, if I'm not an idiot, said drive is going to be encrypted. And the number of idiots of the non-drive-encrypting variety is dropping rapidly, partly because of stories like this.
So my drive is encrypted, and I tell you that I don't know the password.
I have total deniability, because it's not uncommon for an actual innocent person to have an encrypted drive lying around and not know the password. In fact, my original point was that I am an actual innocent person in real life, and I do have many encrypted drives with unknown passwords, some of them probably in places I don't even remember. So what have you proven by finding the drive?
So how could you actually use the dog? Well, it would in fact help you to find good evidence against true idiots if you already had a good reason to search them. But the number of available idiots is probably small and is probably going to crash to insignificance. And you'd probably nail the idiots some other way anyway, because they're idiots and they've already screwed up something else to get you there in the first place.
As for using the dog as probable cause, the way they do with drug dogs at traffic stops, I don't think even today's supine US courts would swallow a hit from this dog as probable cause for anything. Flash drives are as common as dirt. 99.99 percent of them are totally innocent. Probably 99.9 percent of encrypted drives are totally innocent. So even if the dog were perfectly reliable, the hit wouldn't mean anything about crime and wouldn't justify anything further. And I think this is more a house search thing than a traffic stop thing anyway.
Which means I'm still not seeing the use of this dog even if you assume the cops are corrupt. Drug dogs are magic search authorizers for corrupt cops, but this one won't help them. And on the non-corrupt side, I bet the dog rarely actually finds usable evidence, and still less often finds decisive evidence, and I bet that becomes even less common within a few years. People will encrypt the drives, and they will have total deniability. The whole thing is a waste of time.
On reflection I was wrong about the "excuse to ransack your house", though. The dog might clue them in to tear open something they otherwise wouldn't, but I suspect that in most cases, once it gets to the point of executing a warrant, they're just going to tear everything up anyway. And as I said the standard "traffic stop" dog abuse won't work here the way it does for drugs.