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Offline Files not encrypting via GPO

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I'm trying to encrypt the Offline files Cache ("%systemroot% \ csc" folder) for all of my laptop users via a GPO in a 2003 domain. Without implementing the Group Policy, I can manually check the "Encrypt offline files to secure data" box, and the files will encrypt. But whenever I attempt to set the policy via Group Policy in Computer Config \ Admin Templates \ Network \ Offline Files \ Encrypt offline files cache = "Enabled", the "Encrypt offline files to secure data" box on the client greys out, but doesn't check. I then verify that the files aren't encrypted by accessing them remotely and by viewing the output of the cipher command.

I'm currently trying to implement this just using a test GPO, where the offline file encryption is the only item configured. I verified that nothing from the default domain or the computer's local policy are blocking this policy. Also, I've tried manually adding registry entries to HKLM \ Software \ Windows \ CurrVer \ NetCache, but that doesn't work either.

I'm not using Fast User Switching on my XP client. I also don't have compression enabled on the drive where the offline files live. How can I ensure that all my laptoppers have encrypted offline files without having to visit them door-to-door?

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by nivek r.

BFilmFan, sorry, but didn't know how to answer your questions without rating your reply as "unacceptable" (haven't been to T.R. in a long time), so here's the info:
I just tried setting the policy in my test GPO under Computer Config.\Admin. Templates\Network\Offline Files\Encrypt Offline Files Cache. Nothing's configured in Comp. Config\Windows Settings\Security Settings\File System. However, in the Domain Policy, our original domain admin acct. is listed under Comp. Config\Windows Settings\Security Settings\Pub. Key Policies\EFS as a recovery agent. Couldn't find any other policies that looked applicable.
As for the service release level of the servers (I hope you're talking Service Packs, as I can only find "Service Release" levels for Office), we have 3 DCs running 2003 Standard, SP1. The client is running XP SP2.

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