Something like this wouldn't really protect you from law enforcement. They perform forensic disk duplication before mucking around with a drive. If you provide a fake password to TrueCrypt and it starts overwriting things, it would be pretty obvious to anyone investigating the drive what's going on.

I'm not sure how such a feature would work or how useful it would be, for that matter. Maybe the TrueCrypt binary would attempt to decrypt the first X bytes of the partition under the "coercion" password and then check if it matches some known signature. If so, flip a bit in each encrypted block to scramble it.

Problem: forensics people can use a write-blocking adapter on the original disk and simply make copies to try out the decryption. So, the feature sounds both irritating to implement and (worse) perhaps give a false sense of security to a novice.

http://www.truecrypt.org/docs/?s=hidden-volume is probably more what you want.