"Once the audit has finished there's still the possibility of holes, but Truecrypt will be in a stronger position than now. In the meantime though, using crypto software that is unsupported and has publicly been declared insecure by the devs is a bad idea - you've got a potentially false sense of security and nothing more."
Except, like I said, there's nothing else on offer. As for the public declaration that it's insecure, best case, they're lying so as to look like a dead canary. Worst case, that simply puts it in the same boat as every other encryption software on the market for the simple reason that we don't know enough about the alternatives. The one thing that sets TrueCrypt apart is that audit. No other encryption software has been audited, and none has a formal proof. Which means, even after the declaration, it's STILL the best on offer in a world where no encryption is not an option. Put it this way, even a false sense of security is preferable to NO sense of security. The alternative is to go offline, which for many of us is not an option at all.
PS. Before suggesting PGP/lo, consider users who can't use a loopback device. Many people have no choice but to use Windows on systems that lack the capacity to dual-boot or use a VM (like a netbook--nice for air travelers as anything bigger draws increased security scrutiny but not very powerful).