An update on PGP WDE
Since May I've been using PGP Whole Disk Encryption on my laptop and his Time-Machine external drive.
Almost 6 months later I can report that it works great, you don't notice it at all. Strongly recommended, if you need this sort of thing.
But there are no completely secure software-only solutions, and its good to know the limitations, like the "Evil Maid" Attacks on Encrypted Hard Drives.
The comments on the article are also worth a read. There are some proposals in there that might work and defend against this kind of attacks.