Well - there is no way to be sure that your dump is correct. So I wouldn't try to decrypt something that most likely isn't encrypted at all.
If you connected the address or data lines in the wrong order for example, you will still read the correct amount of data but it will be useless garbage.
Since the NAND controller is attached to the SB the same way as the later 16 MiB NOR flash, the file you read from it should look the same as a 16 MiB NOR dump regarding file structure.
If somebody has a disassembled PS3 with a 16 MiB flash handy, it would be interesting to see if the same test points are still there. In this case you could just use a multimeter to map out the connections from the test points to the 16 MiB NOR pins. That should match the correct pin assignment for the NAND controller.
Hrm ... something doesn't add up with the description of the test points. To address 256 MiB with word access you'd need A0..27. With A0..17 you could only address 512 KiB