Can’t use TrueCrypted drive directly in Win7 Backup, but have to use windows share… this means no image backups :(

TrueCrypt doesn’t support Volume Shadow Copy

Alternative: BitLocker or http://en.wikipedia.org/wiki/Comparison_of_disk_encryption_software

Update 25-01-2017:

Unfortunately the same seems to be true for VeraCrypt (and Windows 10). If a volume is mounted in VeraCrypt and you try to create a system image it’s not possible to select where to save the backup (error 0x80070001). The VeraCrypt documentation lists the following limitation:

The Windows Volume Shadow Copy Service is currently supported only for partitions within the key scope of system encryption (e.g. a system partition encrypted by VeraCrypt, or a non- system partition located on a system drive encrypted by VeraCrypt, mounted when the encrypted operating system is running). Note: For other types of volumes, the Volume Shadow Copy Service is not supported because the documentation for the necessary API is not available.

( https://veracrypt.codeplex.com/wikipage?title=Issues%20and%20Limitations )