I suggest you use TrueCrypt to encrypt your entire drive, right from the boot process, because that way everything is encrypted. The software, including your database server software, won't notice any difference, and if you have one of the newer CPUs that had specialized AES processing functionality (hardware accelerated AES) then TrueCrypt will take advantage of that too (which will benefit performance).
I use TrueCrypt to encrypt the entire hard drives of all my computers, and I've not experienced any performance problems with it (even with my older machines) with versions 6 or 7 (although version 5 was a bit slower, but that's ancient history now). I'm also using PostgreSQL for database development and it doesn't seem to be effected negatively.
You can create a separate partition that holds non-encrypted data, but the speed benefit will likely be unnoticeable (and if a temporary file with important data lands on that unencrypted partition, then you'll have defeated your efforts to use encryption to protect your data). Encrypting everything is also better because an adversary won't know which encrypted data is important without first decrypting it, and not having to deal with multiple partitions is also simpler.
I really like the idea of using encryption because if someone physically steals my computer they won't be able to access my data unless they can also decrypt it (but most people who steal computers are usually more interested in selling them on the black market, and I suspect that the buyers are usually more interested in just getting a cheap computer for their own personal use -- if they can't log in to the OS, then my guess is that they'll most likely just format with a new OS installation).