After creating the folder C:\Users\username\Music, I was able to see, and change the destination folder in WMP12. Additionally, all the other Rip settings can now be changed and "take" when the [apply] button is clicked.
Note to Microsoft: This HAS to be a bug and needs to be fixed (with an actual fix or at least a more descriptive error message). I can't be the only person that wanted to change the location of their Music folder off of the default C: drive location (especially when one's C: drive is an expensive SSD like mine).
Thanks again SaNiC. You are my hero.