I have Ubuntu 10.04 installed with encrypted home directory.
/home is on a a separate partition. Can I just boot from a 10.10 CD, reformat
/ and install as usual? Should it work if I use the same password? Is there anything else to keep in mind?
I have previously done this on Ubuntu and Mandriva.
This will work and you will be able to mount your existing /home partition even if it is encrypted as long as you know the passphrase.
Thing to keep in mind is to set up the mount points correctly and don't accidentally format your /home partition.
You should take a note of your mount passphrase. This is covered on the page
https://help.ubuntu.com/community/EncryptedPrivateDirectory - "Recovering Your Mount Passphrase"
It will work as long as you use the same username and password.
Actually you won't need the passphrase, just the password that will be asked when you first login after the installation.