How do I disable "you need to format this disk" message in Windows Vista/7?

Try to go to the Control Panel - Administrative Tools - Computer Management. In the Disk Management part, remove the drive letter for the raw partition.

It should prevent Win7 from asking you to format the partition, while letting you mount the partition in TrueCrypt.

If it doesn't work, you could try this suggestion, which is to use Autokey to automatically dismiss the messagebox when it appears.

I have finally found a solution. I've tested this on Windows XP and Windows 7. With this solution device can't be accidentally formatted, when you plug it on another PC.

When you create a raw partition with TrueCrypt, it specifies it as partition type 0x06. This is a FAT partition, and Windows will always try to mount it.

Using a utility such as Beeblebrox (or your favorite RAW partition editor), change it to something else. I chose 0x64 which (based on the partition lists available) is a "PC-ARMOUR encrypted partition".

After changing it and then unplugging and replugging your device (power cycle), Windows will treat this partition as foreign and will not attempt to mount it. I will test it on Linux later, but I believe that'll prevent Linux from mounting it as well.

P.S. As Beeblebrox seems a bit outdated (last update of the Windows version in 2002) for newer Windows you can use internal diskpart. The commands for diskpart are:

list disk
select disk # <- your disk number here
list partition
select partition # <- your partition number here
set id=64
exit 

Credits are for @jonas-heidelberg and @mhenry1384.

I use a program called USB Safely Remove, which knows about TrueCrypt and can be configured to automatically pop up the TrueCrypt password dialog when certain USB drives are inserted. It also allows you to unmount the TrueCrypt drive and safely remove the USB drive with a single click.

It's a commercial product (with a free trial), but they are currently giving away some free licenses, if you're quick. It's legit -- I got my license in their last giveaway.