Hi Jill,
So you are saying you still get the cryptographic error if you save site settings when then config option is enabled?
It does encrypt those credentials so if its still having some underlying crypto issue it would show up there.
I'm not able to produce the symptom on my local machine using IIS 7, I tried Classic Mode but it still worked.
Can you tell me some more info about your hosted installation, these things may help me produce the problem.
Is it Medium Trust Hosting?
What is the structure of the url for your site, a root site or a sub folder?
Configured for multi site hosting? host name based or folder based?
Best,
Joe