In previous versions of Ubuntu you could create users with encrypted partition from the "User Accounts" GUI utility. Now this option is absent from Ubuntu 11.10 (oneiric). How can you create a user with encrypted homedir in 11.10. Command line instructions acceptable! :)
adduser is a perl script that takes care of the details of adding a user and will do what was removed in GNOME3
sudo adduser --encrypt-home USERNAME
If you upgrade to 11.10 from for example 11.04 then use
sudo adduser --uid OLD_UID --encrypt-home OLD_USERNAME
Make sure to use the same password as the old accounts, use
ls -lan /home to find OLD_UID.
I am not sure about an encrypted home partition but to add users
sudo useradd -m -p PASSWORD USERNAME
sudo adduser USERNAME
may also do the trick accoording to their manuals
The lack of graphical way to add a user with an encrypted home in Ubuntu versions using GNOME 3 is documented in bug #816669.