> .. the LUKS key is stored in the TPM. Which is protected by a password.
Yup. Nope. The key is protected by TPM magic :). TPM measures stuff, then we put the key in TPM and seal it to PCRs 0-13 measurements (whole boot environment). At boot, TPM will allow tcsd daemon (part of initrd) to read LUKS key once, and only if all measurements match, this is as far as I got.
End result is unlocked volume, without any passphrase prompts, neither on console nor via ssh.
And this could also work via dropbear. There'd still be an exposed dropbear SSH key in /boot. But it'd be the TPM that you're unlocking. And I assume that there are ways to verify the authenticity of the TPM via initramfs, before providing a password.
Am I understanding that right? It does seem more complicated. Especially given that you don't have physical access to the server.