I just tried this out.

Start with a working Windows 11 ARM VM - otherwise you might have to mess around with the EFI boot strings and that isn't going to be pretty.

Make a backup copy of the working Windows 11 VM by copying it elsewhere.

On this working VM:

• Remove the TPM device (unless you're using BitLocker, you won't have a problem with removing and re-adding a TPM device).
• Decrypt the VM.
• Now go to the VM's settings and click "Add Device...". From there, select "Existing virtual disk".  Navigate to the old VM and select its virtual disk, and specify that you want to make a copy. Leave the original alone.
• Re-encrypt the VM
• Add the TPM device back into the configuration

On your next boot, Windows may ask you to reset your PIN if you've configured Windows Hello. That's an artifact of losing the TPM device, (I had to reset my PIN - thank heavens that Microsoft Authenticator on my iPhone tied to my Microsoft account made that super easy.)

Upon login, my other VM's hard drive is now seen as the E drive. 

It does seem a bit strange that the VM won't allow you to add a disk that doesn't have any component of it encrypted. Perhaps that's a remnant of the older fully encrypted disks worked. Paradoxically, Fusion allowed me to remove that second virtual disk without decrypting the VM. Go figure.

I've also been able to edit the vmx directly, both to remove and add virtual disks.  Not for the fainthearted, but it works without all the hoops (which surprises me that the UX is more restrictive).