This sounds like you were running the old "legacy" version of FIleVault (from Snow Leopard or earlier), where a home folder is encrypted into a sparse bundle disk image (on your Mac -- separate from any backups).
When Lion was released, and whole disk encryption was enabled (a completely different thing), for some reason Apple used the same name for it (but sometimes called it FileVault 2). It was possible to transfer/upgrade a FileVault1 home folder onto a Mac running Lion.
It sounds like that's what you did.
I doubt it will help, but look inside the Time Machine sparse bundle. Double-click it to mount it -- a disk image named "Time Machine Backups" should appear on your desktop and/or Finder sidebar.
Inside it should be a single folder named Backups.backupdb; inside that is a folder named for your Mac; inside that is a series of date-stamped backup folders; inside each of those is a folder for each drive or partition that was backed-up.
Inside that is the same folder structure as on your Mac. In this sample, the normal jamespond user account has the usual set of sub-folders, but the TestAccount, a FileVault 1 account, does not -- inside that folder is the encrypted sparse bundle (TestAccount.sparsebundle) containing the home folder and all the sub-folders:
Start with the most recent backup folder and look for the File Vault sparsebundle. Double-click it to open it. You should be prompted for the login password you set when encrypting the account (or the master password).
If all that works, you should then be able to copy your files from the sparse bundle, but you won't be able to use Setup Assistant or Migration Assistant. You'll have to copy your files from inside the sub-folders (Desktop, Documents, etc.). Don't copy the actual sub-folders, as those are protected. If you get this far and still have a problem, post back with details.
. . .
Looks like Apple lost my data =( Aside from my accountname appearing in Migration Assistant, there is no trace of my home directory.
Are you sure? Check the most recent backup -- if the sparsebundle isn't shown there, as in the sample, work backwards. It's not backed-up while you're logged on, but I forget whether the last version that was backed-up will appear on those other backups.
If not, be sure you're logged-on with the same user account as the File Vault account. If you had more than one account on the old Mac, but only one on the new one, try creating one or more new, temporary accounts, and see if they can see the sparsebundle.
As I recall, though, it's very difficult to gain access to an encrypted home folder from a different Mac than the one it was backed-up from.
I'll see if some data recovery company will give my old laptop a try.
That won't help with the encrypted data. Even if you recover files, they'll still be encrypted, but there's no way to decrypt them.