Let's look at the Ubuntu implementation. It uses AES-256 to encrypt the disk volume using an appropriate cipher feedback mode to deal with frequency attacks and other such attacks against statically encrypted data. First, is the cipher secure? The answer there is, yes. AES (Rijndael) has been subjected to extensive cryptanalysis both as part of the AES cipher competition and afterwards, and there are no known compromises against full AES. The reality is that even AES-128 would be sufficient for this purpose, because the weakness of the Ubuntu implementation lies elsewhere: the passphrase. A NSA employee once stated in public that they didn't care anymore about how well encryption algorithms worked, because there was an infinity of methods to obtain the passphrases of anybody they really wanted to spy on.
Remember, a cipher is *not* a cryoptosystem. A cryptosystem consists of both the cipher, and the software required to feed it keys and data. In this case, the biggest weakness is in the keystore (stored in the header of the volume) and the method of securing it. The keystore is secured by a passphrase. Brute force dictionary attacks against the passphrase to decrypt the keystore might work, but usually won't if you chose a sufficiently complex passphrase incorporating non-word "words". The most likely attack here is either a passphrase sniffer injected into the system or a phishing exploit where a prompt is put up for the passphrase, but it is not by the login process, it is by software previously injected into the system via other means (typically a network-based exploit that then uses a privilege elevation exploit to gain permission to insert itself into the system boot sequence at the correct place).
Or, black bag cryptanalysis could be used if done by a determined organization -- a hardware keystroke scanner placed in your system, a pin mike pointed at your keyboard that then can be used to determine what keys were pressed based upon sound (each key has a subtly different sound when pressed, and which keys were pressed can be determined via frequency analysis for your language and assigned to the appropriate sound given sufficient keystroke sounds recorded), a pin camera can be mounted somewhere aimed at your keyboard to record your key presses. If you cannot guarantee that your system and computing environment has been physically secured, no cryptosystem is going to be sufficient. Thus the various exploits against ATM machines, where the machines are physically compromised (via scanner equipment physically added to them) to gain access to ATM card codes and PIN numbers for later use by thieves.
The Ubuntu setup, in other words, is sufficient for dealing with the issue of casual theft of computer equipment by random thieves -- they will not have previously captured passphrases thus will be reduced to brute force dictionary attacks upon the keystore encryption, which should fail as long as you choose a sufficiently complex passphrase -- but is insufficient to deal with a determined attack by someone who is willing to go to the trouble of rootkit'ing or black-bagging you. In particular, it is useless for dealing with network-based exploits, which occur after the passphrase has already been entered and can extract your data via the network accordingly. So it is useful, but adjust your expectations -- it is not going to stop a determined attacker (as vs. a casual theft of your drives or computer).
So, could this setup be made more secure against even passphrase interception attacks? Yes and no. You would need to load the Linux kernel and all pre-boot software from secure read-only media and also have the keystore reside there, then physically secure this media in some location other than with your physical hardware. A dongle in your laptop bag, for example, is not sufficient. You would need to have this media physically secure in your presence at all times to avoid having it compromised by black bag attacks, and have some method of physically destroying it if impending rubber hose cryptography seems likely and the data in question is so sensitive that the repercussions of it being decrypted is dire. But even there, you're still susceptible to ordinary network-based attacks that trick you into installing malware onto your drive or which exploit holes in your network software and which then steal your data via the network.
The reality is that the only computer that is completely and utterly secure is one located in a vault with no network access. Unfortunately, said computer is also not very useful for our day-to-day computing needs. The LUKS setup sufficiently deals with the problem of casual theft of computer equipment but will not stop a determined attacker with the resources of a major criminal syndicate or government behind it. It is a reasonable compromise between security and usability. So adjust your expectations accordingly.
-ELG
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