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.
The answer is yes, provided he also has acces to the entropy key(if one is created), or if he is willing and capable enough to hack into the blobs (see links below).
For the Master key in DPAPI (in CurrentUser mode), the windows login username and password are used to generate the master key. If the administrator updates the user's domain password, DPAPI wil reencode the master key for that user. The same goes if the user updates his password due to eg. a monthly password change policy.
However, if he doesn't have access to the optional entropy key or the data that composes that key, the file will remain encrypted and all he will get is invalid data.
If DPAPI is used in CurrentMachine mode, the file can only be decrypted on the computer that encrypted it, however the file will be readable to all accounts on that computer, again provided they can also muster the content of the entropy key.
A good repository for information is DPAPI Secrets and this paper on reverse-enginerring DPAPI + link to a tool that can recover data from DPAPI blobs