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"the prosecution already knows"

Sorry, you lost me. If the prosecution "already knows", then why does the drive need to be decrypted? It sounds like they already have the evidence.

And if they don't? Well, that's the definition of a "fishing expedition", isn't it?

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Imagine that we're talking about accounting fraud. The prosecution might be able to prove that the relevant accounting records exist, and have grounds to believe that these records would prove that fraud occurred, but not have the actual contents of the records themselves.

Child pornography is special, because merely having "possession" of certain information is a crime. The law itself is bizarre, so you get bizarre results like this.

In the abstract, it's possible to have knowledge without having proof.

I don't know what "in the abstract" means in this case, but I do know that claiming to "know" something without having actual proof is what's called a conjecture:

http://www.merriam-webster.com/dictionary/conjecture

A conjecture is not the same as knowledge, "in the abstract" or otherwise.

If I saw something with my own eyes, but didn't capture a video recording of it, I could argue that I have knowledge but not proof.

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