This could be a problem introduced with patch 1.05, but since I was not trying it before this I cannot be sure. I am running Vista X64 and the game is being run as An Administrator, so there is no issue with permission or writing of the user.ltx file.
I spent some time working and finally figured out that the only way to get the settings to save setting changes is to save the game. Specifically, make the menu alterations, then return to the game and save it. Once it is saved, quit the game and restart it. The settings will now have been saved.
Hopefully this will be fixed for 1.06.