Full disk encryption with dm-crypt (without LUKS)
Solution 1:
I'm the author of http://and1equals1.blogspot.com/2009/10/encrypting-your-hdd-with-plausible.html, and have been meaning to update it for some time as I've noticed it doesn't work with more recent distributions. Here's what I've uncovered so far:
On an Ubuntu 14.04 system using LUKS and LVM, there's a file in /usr/share/initramfs/hooks called cryptroot that I believe is supposed to copy /sbin/cryptsetup to the initramfs (via the copy_exec function) when mkinitramfs is called. Querying the dpkg database, that file is part of the cryptsetup package, which is explicitly installed as one of the final steps in my guide before installing grub. I don't fully understand why it's not in the initramfs built on your system then.
I'll look into it as time permits, but here's what I would suggest if you want to continue pursuing this:
Search for the executable in someplace other than $PATH on the initramfs, if you haven't already done so. I think it gets copied to /sbin/ in the initramfs, and I don't know if that's in the path.
During image creation, such as when it's prompting to install grub, switch to a second terminal (Alt-F2), and make sure the /target/usr/share/initramfs/hooks/cryptroot script is there and /target/sbin/cryptsetup is as well.
Figure out the hooks script format well enough to explicitly copy the binary to the initramfs, possibly as a new name (may be better for plausible deniability anyway). Create it and run "update-initramfs -u -v | less" to update the latest kernel's initramfs (search through the output for cryptsetup to verify) and "update-grub" just in case. Make sure your boot stick is in and /boot is mounted when you do this, of course.
You may want to play with removing /usr/share/initramfs/scripts/local-top/cryptroot (like maybe delete it) so that it's not so obvious to someone booting from the boot stick that it's waiting on an encrypted partition. That might make it look more like a simple rescue stick instead.
As I get time, I'll see if I can get this working on Ubuntu 14.04 and create a new post on the blog. I'll add a link here to whatever I do, as it appears by the traffic this generates that you're not the only one searching for something like this...