[joev]

My (former) home network backup solution had a truecrypt volume created locally, and rsync'ed to my offsite backup provider (rsync.net). It did not have to send the entire volume for small diffs; in my experience, Truecrypt keeps local changes local in the volume.

[michaelcampbell]

That's a good point; thanks. I'm not sure if Dropbox diffs at sub-file level - perhaps it does.

The short story is that Dropbox + Truecrypt work fine, but may not (or may!) be optimal.