I had the same problem on Ubuntu 10.10.

Downgraded libfuse2 using "sudo dpkg -i --force-downgrade
libfuse2_2.8.4-1ubuntu1_i386.deb", after downloading the .deb from
https://launchpad.net/ubuntu/+source/fuse/, so TrueCrypt is working
back.

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https://bugs.launchpad.net/bugs/727220

Title:
  Command "fuse" returned error 1 (with TrueCrypt)

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