Re: How secure is the Encryption that Ubuntu uses?
A better idea to protect files (not the entire system) is to use something like TrueCrypt to create a folder of X mb that looks like a file. Decrypt it only as needed, and immediately encrypt when done.
As for your first question about how secure vs the different groups, that depends on what you are willing to take as a loss. Basically, you want to not have physical access when things are in their decrypted state and soon enough after it that a cold boot RAM dump is not feasible.
Here is what I would say on the issue:
You can hide files and change the permissions so that only the superuser can read/write etc. You should have a guest account for friends so that they simply cannot access the area where the folder is stored. In terms of defeating attacks you have to make a choice. Create backups (which an organized attack like the FBI would probably find) or minimize the risk by minimizing the targets an attacker has. I think you basically have to just accept that if some one (or group) get's physical acess to your computer or convinces you to run something on your computer, and you know it, than it is a total wash. I would take a purge aproach in this case. Everything associated with that computer is a total lose. An important note here is that we are talking about a group that will obey the laws and doesn't have a reasonable suspicion that the data is on a computer, even with hidden encrypted volumes.
If you don't know about acess, well, you are screwed. Game over, at some point no matter what you do, you will be compromised because you don't even know some part of your security, the most fundamental part, has been overcame.
Scary though: it is a group like Russian mop that wants what is on your computer. Consider your entire lifestyle a loss and get the hell out of dodge. Cause for sure, if the Russian mob (or maybe even the CIA in one of my governments fun Hilton Torture Inn that we franshize to fun places) get a hold of you they arent not going to bother with cold boot attacks etc....You just became a real life example of the xkcd joke on encryption.
Oh, you might find it interesting that the FBI doesn't even need direct physical access. Methods used include analyzing the variation of the acoustics of each key, the EM radiation differences by key, differences in micro sugers of voltage in your power lines in your house.
"Si Dieu n'existait pas, il faudrait l'inventer" -Voltaire