I want to encrypt passwords using the DPAPI like this
ProtectedData.Protect(plain, optionalEntropy, DataProtectionScope.CurrentUser);
and wonder if the domain administrator could decrypt the generated blob, as Using Passwords Effectively states:
However, in a domain environment a domain administrator can safely change your password, and you'll still have access to your encrypted files.
It seems like the domain administrator would have to decrypt the data (or rather, the encrypted master keys) first, in order to be able to re-encrypt it using a different password.
Short answer : he probably can't right out of the box, but Domain Admin is powerfull. There are many ways they can get to your key if they really want it.
Long answer : DPAPI encrypts your data with a key. IIRC, it uses AES with a key that changes every 90 days. The key is stored on your computer, encrypted with your password. That's the default and it saves your key out of reach of anyone but you.
Unless your domain admin remotely installs a key logger, steals your password, impersonnate you and steal your key (or go straight to the data which he now sees in plain text).
Another somewhat less known fact is that when Credential Roaming is enabled on Active Directory, it will send your encrypted keys to a server. A domain admin could use that copy for an offline attack. But it is hard and unless your data is very valuable, I woulnd't worry about it.