How can I block the traffic outside the VPN, even if the VPN is down? I would like to direct all the traffic through my VPN connection on my Android based phone (HTC Desire). The VPN works great, but problem is that when the VPN disconnects, the traffic is redirected through my regular internet, something I don't want to happen. How can I block the traffic outside the VPN?
You could use DroidWall for this IF you're rooted. Just deny all traffic and then allow traffic to your VPN IP/port. If you need to use a custom script see the man page of iptables for the syntax. Here's a quick, untested example.

iptables -P FORWARD ACCEPT
iptables -P INPUT DROP
iptables -P OUTPUT DROP
iptables -A OUTPUT -p udp --dport 1194 -d xxx.xxx.xxx.xxx -j ACCEPT