File-backed loop devices and "lock ups"

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I have read here that the use of file-backed loops encrypted with loop-aes is a bad idea because it might result in "lock ups".
 
a) What exactly is a "lock up"?
b) Is this a threat to the security of the encryption (watermarks etc), or is it a threat to the integrity of the original data itself (ie you might lose the data altogether), or is it both?
c) Is this a version-dependant issue?  I have experimented with file-backed loops on v1.6i-1 (old and not recommended, I know, but that's what's inside my distro) and nothing has ever 'locked up'.
 
Thanks again


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