You have problems installing CyanogenMod upgrades automatically. When you boot into recovery and try to apply the update manually, you run into problems because it “can’t mount /data”. This is because you have enabled full disk encryption on your Android device (good for you!).

The way to work around this is to install the upgrade via ADB sideloading. The problem with upgrading is not that it cannot modify the encrypted data, but that it cannot find the upgrade image with encryption activated. The way around this is to hand the image to the device via USB while in recovery mode.

Steps to perform this (courtesy of http://www.feise.com/~jfeise/blogs/index.php/2013/07/06/upgrade-cyanogenmod-on-an-encrypted?blog=8):

1. Connect the phone to a computer using USB.
2. Install the android-tools package.
6. Load the image on your computer by typing adb sideload <image_name>.