LinuxQuestions.org - TrueCrypt Problems-Unable to mount

Try using these instructions. It seems like you only created the Key file. You also need to create the encrypted volume and then format it.
See below:

The key generation
To generate a key type:
truecrypt -- keyfile-create key.txt
Of course you can choose another keyname, and the extension.
Is your mouse connected directly to the computer where TrueCrypt is running?
Press “Y”, then you will be prompted to move your mouse
If everything was OK, the following text will be displayed: Keyfile created.
The virtual volume creation
To create a new volume you have to consider its name and type. There are only two types of such volume: normal and hidden. What is the difference between them? The hidden is just that, hidden (the placement is different - more info on TrueCrypt homepage).
In a terminal type:
truecrypt -c home.txt

You create a volume named home.txt. The extension is at the user’s
discretion, I’ve chosen *.txt, because it is more difficult for
a potential hacker to discover that it is a volume

Volume type:
1) Normal
2) Hidden
Select [1]: select 1

Filesystem:
1) FAT
2) None
Select [1]: select 2, because you will create other filesystem than FAT
on your volume, default is FAT

Enter volume size (bytes - size/sizeK/sizeM/sizeG): 10M -
now you state a size for your volume, I have chosen 10 MB

Hash algorithm:
1) RIPEMD-160
2) SHA-1
3) Whirlpool
Select [1]: choose hash, I suggest SHA-1, default is RIPEMD-160

Encryption algorithm:
1 ) AES
2 ) Blowfish
3 ) CAST5
4 ) Serpent
5 ) Triple DES
6 ) Twofish
7 ) AES-Twofish
8 ) AES-Twofish-Serpent
9 ) Serpent-AES
10 ) Serpent-Twofish-AES
11 ) Twofish-Serpent Select [1]: choose the algorithm, default is AES

Enter password for new volume ‘home.txt’:
press [Enter] if you don’t want any password
Re-enter password: press [Enter] again

Enter keyfile path [none]: here enter a full path to the key or
leave empty if you don’t have any key
Enter keyfile path [finish]: you will be prompt again to enter
the path. In case you have more than one key type another path, and
if you have entered all the keypaths, leave empty and press [Enter]

TrueCrypt will now collect random data.

Is your mouse connected directly to the computer where TrueCrypt is running?
Press “Y” if your mouse is directly connected to your PC,
but try pressing “n” and see what happens

Please type at least 320 randomly chosen characters and then press Enter:

if you enter fewer than required the program will show you
how many are missing
Now the program will start to create your volume. The time needed for this operation depends on your CPU and the size of the volume. The script will let you know when it is complete (”Volume created”). In root’s home directory there should be a file “home.txt”. You can try to open it in a text processor, my congratulations if you manage to read anything from it.
Volume mapping and creation of the filesystem.
As you remember you didn’t choose the filesystem for your volume during the creation process. That’s why you have to do it now. This is required because TrueCrypt uses the linux tool mount to mount a volume which needs to be passed a filesystem as an option.
Enter:
truecrypt /root/home.txt -k /root/key
Enter password for '/root/home.txt':
if there is no password to this volume just press [Enter]
OK. To check if mapping has gone well type:
truecrypt -vl shows info about mapped devices
.
If there is no info, it means that something has gone wrong.
Now you create a filesystem:
mkfs.ext3 /dev/mapper/truecrypt0 you can choose any filesystem
The filesystem has been created.
Mounting created volumes
Now when you have created a filesystem on your volume and mapped it, you can mount it to any directory.
To do this type:
truecrypt -d /dev/mapper/truecrypt0
unmaps the volume
mkdir encrypted -
creates a directory named “encrypted”, this is the directory where you are
going to mount the volume
truecrypt /root/home.txt -k /root/key /root/encrypted
mounts volume to encrypted directories
Done! From now on all data saved in “encrypted” directory will be encrypted.