Folder Monitoring on Localhost Not Working

I am starting off of a clean database on version 8723. I add in the "localhost" (Windows XP Type) as one of the devices and try to associate a folder monitor to it. However, no matter how I set up the folder monitor I do not get any information or alarms.

Then after playing with it for a while, I start getting an error saying that I need to configure the credentials for the device, but since it is the localhost I cannot. If I delete and re-add the localhost this message goes away, but I am still unable to monitor the folder.

Also, one other strange thing. Even though I never specify a user name and password, a user name of admin is entered and a password. When I try to test this, I get the can't configure credentials for localhost message, but I am unable to permanently delete the user name and password from the associated credentials.