It is possible, I've had Windows XP and Ubuntu with TrueCrypt on my home PC. Never had any experience with Vista or Windows 7, but this fellow did it, so it's possible.
You will have to decrypt both the system partition and partition where you are going to install Windows 7. Go to "System > Permanently decrypt system partition / drive" menu and then follow the instructions in the wizard. If I remember it right, there wasn't any way to decrypt non-system partition, so you can just format it. After that, install Windows 7 and encrypt both system partitions again.
It's a bit cumbersome, but there is no other way :]