The encryption key is actually sent to the javascript (responsible for encrypting) which is inside this template... Make sure it is getting included.. it is part of the responsive theme, so it should be, but start looking there anyway.
templates/views/orders/components/payments/cc_eway.tpl:
var eway_enc_key = '{$cart.payment_method_data.processor_params.encryption_key}';
eWay suggested that the problem may be to do with the card validation jquery running (part of CS-Cart). They gave me this code to add, but I dont know where (and I think if its a problem with CS-Cart they really should patch it).