We need to tell GRUB how to boot into our chroot so the machine knows how to boot.

Background: init, initrd, and switch_root

One of the most god-tier commands I've ever encountered in Linux is switch_root; this super simple command is part of util-linux package and does what it says on the tin. It's mostly meant to be used by initramfs to allow bootloaders to change root, but you can use it as many times as you like.

Creating our init script

You can effectively put this script anywhere you like, but remember that this is going to run with absolutely max permissions at root. Put it in a secure place with the right permissions or you're going to be sad.

The script is simple:

#!/bin/bash

mount -o bind /path/to/chroot /path/to/chroot

# change the path to systemd as necessary
exec switch_root /path/to/chroot /usr/lib/systemd/systemd

And that's all we need. Obviously, change /path/to/chroot and the path to systemd (as found in the chroot) or init as necessary.

Adding the GRUB boot entry

Generally, I would suggest taking a peek at the /boot/grub/grub.cfg file and seeing how your existing menuentries look. This will largely determine how you write your menuentry. Regardless of what you end up writing, you should add this menuentry to /etc/grub.d/40_custom so that it's added to grub.cfg safely.

My menuentry looks like this, for reference:

menuentry 'Blackarch' --class arch --class gnu-linux --class gnu --class os $menuentry_id_option 'gnulinux-blackarch-8ed35644-7895-4d7d-b4e9-59769ea11960' {
	recordfail
	load_video
	gfxmode $linux_gfx_mode
	insmod gzio
	if [ x$grub_platform = xxen ]; then insmod xzio; insmod lzopio; fi
	insmod part_gpt
	insmod ext2
	if [ x$feature_platform_search_hint = xy ]; then
	  search --no-floppy --fs-uuid --set=root  aaaa83e9-ef27-4c29-8c54-b3c3468c49a6
	else
	  search --no-floppy --fs-uuid --set=root aaaa83e9-ef27-4c29-8c54-b3c3468c49a6
	fi
	linux	/vmlinuz-0blackarch rd.luks.uuid=4fa5a9e1-dbdd-4ad4-a0e7-52908229dd34 root=/dev/mapper/kubuntu--vg-root ro init=/home/addisoncrump/blackarch/scripts/blackarch-init
	initrd	/initramfs-0blackarch.img
}

Notable things:

Copying generated initramfs

You need to copy the initramfs and vmlinuz generated earlier into /boot and rename them as necessary. This is left as an exercise to the reader, but make sure it matches the values found in your menuentry.

update-grub

Now just run update-grub. It'll let you know if there are problems with your custom menuentry.

You may need to change your /etc/default/grub as well, as most configurations skip the GRUB menu by default. I leave this also as an exercise to the reader, as this will largely depend on your configuration.

Reboot and test

Go ahead and reboot. If you have trouble here, you're largely on your own, but you can contact me if you really can't figure it out.

Conclusion

Yes, you can boot directly into a chroot, even on encrypted systems. Pretty powerful, actually.