The sparse image sounds like the best solution.
Whatever the "secret files" are (lets call them porn for simplicity), hiding them in some normal folder doesn't work that well since they will still show up in "recently used files" in the video player and so on. I think that would even be the case with .hidden files.
One option would be to put everything in a folder "porn", and when you're done using the files, rename the folder to ".porn". In this way, all the "recently used files" become "file not found", so they become less obvious. To save to the folder, name it back to "porn", and so on. It's a bit of work, but probably not more than entering a password each time.
Of course this only works if no one else has knowledge of unix systems, since a simple ls -l can uncover the .hidden files.