I would expect that a single large file is only better for performance if you usually read all the data, read it sequentially and if the large file is relatively unfragmented.
Using any kind of compression or encryption will be much worse for hard drive performance.
According to an answer to this question "there will be some drop in performance, albeit a slight one." The answer refers to a Tom's Hardware article which says
The benchmark shows varying
performance and highly depends on the
processor, followed by the drive you
are about to encrypt: AES and Twofish
provide highest throughput on our Core
2 Duo notebook Dell Latitude D610.
Once you start combining multiple
encryption algorithms, e.g. Twofish
and Serpent, performance drops
considerably. While this isn’t
noticeable while working with Windows
and popular applications, increasing
system load—such as may occur during
heavy multi-tasking or when taking on
intensive workloads such as video
transcoding—will reduce system
The Wikipedia article says
When using popular desktop
applications in a "reasonable manner",
and with only a single encryption
algorithm, the performance impact of
TrueCrypt on desktop applications is
not generally noticeable, though that
does depend on the application, and
power users may complain. Using a fast
multi core processor and a fast system
drive, preferably a Flash SSD, makes
TrueCrypt almost transparent
I don't know of any evidence that shows Truecrypt is going to significantly be "better for hard drive performance".