"This iPad requires backup files to be encrypted"

You have to check the "remember my password" checkbox in iTunes to have it remember your password.

I'm having exactly the same issue using a custom configuration profile.
As soon as I loaded up the profile and then tried to sync with itunes, I got the prompt to enter a password for encryption, despite the fact that encrypted backups is unchecked in itunes and unchecked in the config profile.
Would love a solution to this problem as the only "solution" I have found is to remove the custom profile, perform a sync (where I'm not faced with the password prompt) then reload the custom profile.
Really, that process isnt good enough for even a weekly thing, let alone a daily sync and backup. 10 minutes is wasted each time just resetting the phone to make sure the profiles are flushed/loaded properly.
Anyway jbenfield, I hope that helps for now.

A Configuration Profile from iPhone Configuration Utility is signed & encrypted when installed via USB.

Page 62 - If the device being backed up has any encrypted profiles installed, iTunes requires the user to enable backup encryption.

You can email an unsigned/unencrypted profile and install from Mail. Or you can place this profile on a webserver and install via Safari. It will show as "Unverified", but will not force iTunes device backups.

Check out the Enterprise Deployment Guide.
http://manuals.info.apple.com/enUS/Enterprise_DeploymentGuide.pdf