That part is correct, and it's to save you from doing something rather dangerous.

On modern macOS systems, the system volume is not encrypted. If SSV is disabled, there's nothing to prevent the (potentially modified) system from exfiltrating your password and/or your encrypted data after you log in -- File Vault would be unable to provide any substantial security guarantees in this configuration.

Now, because you can modify the system, you could probably bypass this check, or work around it (e.g. by mounting an encrypted volume during startup). But you should probably think very carefully about what attacks you're permitting before you do that.