Updated Encrypted is only needed if the clients are passing plaintext passwords to the server (it converts them to encrypted in /etc/smbpasswd so encrypted passwords can eventually be turned on). However, only Windows 95 and Windows NT, Windows NT with Service Pack 1, and Windows NT with Service Pack 2 pass plaintext passwords by default. So, I don't think this option is needed -- it is just confusing to most users.
It has been sent to the Great Beyond. Fixed in cvs.