How can I move my /home folder in Ubuntu to another partition (also to be the "My Documents" folder for Windows, which I dual boot) and encrypt it.
Then I want the partition to be unencrypted by both Windows and Ubuntu when I sign in.
It will be tricky, but here are some pointers:
You can mount /home anywhere you want and the process itself is relatively easy. You only need to create a new partition which will be the new home partition. Then format it and mount it somewhere. After that you need to copy everything from old home to new home. Then mount new home partition as home. Here's a link explaining how to do it: http://embraceubuntu.com/2006/01/29/move-home-to-its-own-partition/ It is old, but as far as I can see, instructions still look valid.
The problematic part would be windows and encryption. There are ext2 drivers for windows, but I don't know if they will work with vi$ta. Here are some related links: http://www.ext2fsd.com/
Same thing for encryption. You will need encryption which will work on both windows and GNU/Linux. I know that there are few programs which will do that, like TrueCrypt http://www.truecrypt.org/, but the problem is would windows allow you to use third party encryption on Documents dir? Also, do you want to have entire user directory on same partition as /home, or just Documents?
I know that it is possible to move My Documents, but I have never tried it myself. Here's a link explaining how to do it, hopefully, it'll be helpful http://www.mydigitallife.info/2007/11/25/change-my-documents-folder-default-location-path-in-xp-and-vista/
I myself am not satisfied with options I've offered you. Ext2 doesn't support journaling, and I'm unaware of drivers which fully support ext3. I have also heard that it's a bad idea to try to use ntfs-3g or fat32 for /home partition. I've also read that Ubuntu needs native Linux partition for /home, but I don't know how fresh that information is. Windows could also make problems with drivers if you try to place whole \users directory on a Linux partition, but I'm not 100% sure.
Make sure you have fresh back-ups of you data before you try anything. To me this looks like something that could easily cause data loss if the procedure fails.
I hope someone who actually did something like this could help.