Thumbs up on Truecrypt! I use it too. Makes it easy to backup too .. just copy the whole truecrypt volume. Best of all, it doesn't require a 'special' USB key. And backups are important, especially with USB keys and their limited r/w cycles.
I deal with tape encryption at work and while not directly applicable, here are some things to keep in mind:
1. If the effort of breaking into your data is higher than the benefits of your data, you're good. An identity thief won't put a lot of effort into getting your data - it is easier to dumpster-dive. On the other hand, if you have encrypted child-pr0n on there, the Canadian gov't will spend lots of effort to get at it.
2. Is the data actually encrypted, or just access to the data? This is relevant, because if the data is "in the clear" anything that can dump memory will see it.
3. If the data is encrypted, where is the certificate/key? If it is storing it with the data, but requiring a password to access the certificate/key (like Truecrypt) is less safe (but more convenient) than keeping them separate.
My recommendations:
1. If just protecting personal stuff, get a cheap USB key and Truecrypt.
2. If protecting child-pr0n, go shoot yourself delete it and seek counseling.