First and foremost; Do not use it! (Use loop-AES, Luks or Truecrypt instead.)
Secondarily, putting it into a great, new distro (Porteus) and making it convenient to access/use for inexperienced users is a really bad idea because it creates the worse case scenario: a false sense of security!
For those who are not familiar with the past 7 years of Linux kernel development (since 2004), here are (remain) the problems with "cryptoloop" (which is why cryptoloop was curiously missing from Slax despite the fact that it may seem like an obvious addition. Thomas was keenly aware of the problem...):
1) The cryptoloop system is being deprecated and dropped from the 2.6 kernels - finally! - and for a very good reason, because its broken!
- The following assumes a writable media install (USB etc.) of Porteus. -
2) Running filesystems (FS) on files is a really bad idea, running a journaling FS on a file is even worse and running an encrypted journaling FS on a file is as bad as it gets. (Read the loop-AES manual if you'd like to learn Why. One of the many reasons is that file backed loop devices ***will*** dead-lock under certain circumstances because "With file backed loop devices, correct write ordering may extend only to page cache (which resides in RAM) of underlying file system. VM can write such pages to disk in any order it wishes, and thus break write order expectation of journaling file system." ) Truecrypt, for example, has a substantial amount of specific code to handle file-backed crypto devices - about 50% of the entire code.
2a) The cbc implementation of linux cryptoloop is broken - and always has been.
3) Watermark Attacks, especially on "soft" >1024 bit block, journaling FS are a given while the block size on any modern FS >256MB really should be at least 4096 bits. (- Attn: Fanthom! Perhaps some indication in the manual or extra provisions for the larger optimum FS block sizes...)
4) To replace the Boot Loader and the Kernel with a "fake" one is especially easy on Live Systems - Porteus. The checksum will not help either because we will replace that too and even if you notice a bad checksum - the first time booting the "fake" system - by the time it becomes apparent two things happened: A) If the network connection is already configured (Porteus) then you've already transmitted your password(s);

Correct me if I'm wrong but I think providing a false sense of security to the novice/average user is a critical issue/error. Cheers
p.s. With the same effort/implementation currently in place in porteus why not just replace cryptoloop with dm_crypt (Luks)? Implementing loop-AES would be an even more spectacular feet in porteus, it being far from obvious or easy.