TrueCrypt is an excellent piece of software but the docs are all Windows-oriented. You can, as it turns out, create an ext3-formatted virtual partition (or "container" or "encrypted file volume") but it is not documented on TrueCrypt.org.

Copied from http://ubuntuforums.org/showthread.php?t=149561&page=6

Summary

First, Install TrueCrypt. I'm using version 6.0a. Use the GUI to useful creating an encrypted volume. Choose "FAT" formatting. Unmount, then format the virtual disk as ext3. Release truecrypt, then restart truecrypt and remount the drive.

Details

1. Create and mount your new container, type 'df | grep truecrypt1' to see what virtual device is used (in my case I see "/dev/mapper/truecrypt1 495588 10545 459456 3% /media/truecrypt1" -- the device is /dev/mapper/truecrypt1).
2. Then type 'sudo umount /media/truecrypt1' to unmount the drive
3. Now, to format it type: sudo mkfs -t ext3 /dev/mapper/truecrypt1
4. Finally type 'truecrypt -d' to release truecrypt
5. Now mount it using the GUI and verify it is ext3 formatted.