Encryption on USB - Mac & Windows partitions
If you don't actually require case-sensitivity, Truecrypt is a free and open-source encryption system that will allow you to do either encrypt an entire volume using the Mac OS Extended filesystem or make a encrypted file container (basically an encrypted folder) that can be used to save files as if it were a separate volume.

You will need to download the program from the link above and install it. The Truecrypt program itself will allow you to create encrypted volumes/file containers and mount the encrypted volumes or file containers to your system to use them.