madjr, thanks for the suggestions. I will definitely contact omgubuntu, and I will look into this bug in launchpad.
Home folder encryption with encfs is much less efficient than full disk encryption. The metadata for each file is separately encrypted and requires a separate disk read and crypto operation per-file for stat or readdir. So if you end up with very large directories with lots of files, you can notice a performance hit. Full disk encryption with luks/dm-crypt is blazingly fast and doesn't have to worry about meta data (which also protects your privacy). I have been using Ubuntu with full disk encryption since about 2005, and I have never noticed any performance problems at all.
But more importantly, just encrypting /home is not enough. Sensitive data ends up in your swap partition all the time. Lots of people use things like MySQL databases, the data of which gets stored in /var/lib/mysql. Try this:
zcat /var/log/auth*.gz |grep COMMAND
In addition to all of this, anyone with 5 minutes of physical access to your computer can add rootkits and keyloggers that run on startup, or trojan any of your binaries. This sort of attack still exists against full disk encryption, but it is a lot harder to do, takes lots of preparation, depends on the system it's done on, and if you're paranoid there are ways to make it not work at all at the cost of convenience.
Using full disk encryption when installing Ubuntu will of course not happen by default. It should just be added as an option in the Live CD installer in people want to use it. Windows 7 has BitLocker full disk encryption included. The new version of Mac OS X (Lion) that's coming out soon also will include full disk encryption out of the box, replacing their less secure home folder encryption in current versions. Ubuntu is at risk of lagging behind the two major proprietary OSes in this important security feature.