And Apple may say we're wrong but I have had this issue with my Facebook password. I've let keychain auto generate a password. Later it tells me the password is incorrect. Sorry Apple, but this is the honest truth.
How is your issue with a auto-generated Facebook password relevant to this conversation?
With an iTunes backup encryption password, you must enter it twice. The dialog also directs you to keep it safe ands clearly explains the consequences of not doing so.
Yes, you are given the option to remember it in your Keychain, but that is at your risk. Software based keychains can be lost, damaged and are a smart part of a password strategy, but not the entire strategy.
About encrypted backups in iTunes - Apple Support
This is also the honest truth.