I have the same problem but it is not because of permissions, rather it
is due to lack of entropy.
If I do "gpg --gen-key" from terminal, the generation process halts and
verbosely complains about insufficient entropy.
I need to perform A LOT of activities (1 minute of randomly clicking and
browsing around filesystem) to refill entropy and then the process continues.
I've retried key generation from seahorse and indeed if I do similar amount of
activity then key generation completes.
There is even a bug in that when I press "Cancel" in progress dialog and close
seahorse the key is eventually generated.
Seahorse must show explanation similar to the one given by gpg and a
real progress bar that reflects amount of entropy still needed.
** Changed in: seahorse (Ubuntu)
Status: Invalid => Confirmed
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[Intrepid] Unable to encrypt a folder
https://bugs.launchpad.net/bugs/297206
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