I had this problem too, I fixed it by going to:
Settings -> safari -> advanced -> website data -> remove all website data.
After that I was allowed to make changes to my google setting, ie not saving search history etc. (note it took like 10 seconds for google to actually save the settings :/ )
Hope this helps!
Mor info on this issue, I can't disable the "Search History" (ie: check "Do not save searches") IF I try I get the error message...
I seem to be able to disable the rest of the stuff, without the Search History checked "do not save searches" and save without the error.
If I try to check only "do not save searches" it will give me the error.
There must be something in IOS6 that I checked in someother place on my device that is causing my issue.
BTW there is no option to "remove all website data" on my device, it just show a "grayed out" "0 bytes" beside the "term" Website Data.
Thanks for helping me.