I have a number of USB-powered external hard drives I was going to use for server backups for my Windows 2008 server.
I tested Windows Server Backup, and it seemed to back up fine. However, since I'm concerned about security and the possibility of someone else potentially having access to the drive, I wanted to encrypt it. TrueCrypt seemed a logical choice over BitLocker, since I could always have a copy of TrueCrypt available for recovering data, unlike BitLocker, which would only be available on the Windows 2008 server (I do not have Windows 7 Enterprise available).
I went ahead and encrypted the drive with TrueCrypt, and attempted to back up to the new encrypted volume, but Windows Server Backup threw an error on the last step: "An error occurred while creating diff area file on the backup destination volume. Catastrophic failure."