The issue is that refusing to let customs inspect your electronics is illegal. This is the broken thing. Encrypting is just a half-assed way to try to get past this (I say half-assed, because it doesn't work). I don't especially care that encrypting doesn't "look legal". I care that customs has the right to inspect the digital contents of my devices. That is a completely pointless invasion of my privacy. It doesn't reduce crime. It doesn't protect the country I'm entering. It's just an exercise of power.
It's important to remember the destructive nature of Truecrypt's hidden volume function. Unless you use both keys to unlock the volume, opening the outer volume and allowing the OS to load will destroy the hidden volume that has your real files. It's meant to be a last-resort against a "Use this wrench and beat the password out of him" scenario.
I've only used it with a TrueCrypt volume as a file, where it works flawlessly (unless you continue to add files to the public volume). See http://www.truecrypt.org/docs/hidden-volume
