Encrypted backups problem

I have a problem that I can't make any sense of...
Reproduced on 2 PC's and 2 different iPhones.  PC's are windows 7 and have never had itunes installed.  Phones (3GS) have never been sync'd with itunes anywhere.  Setting that up now so that I can take a backup to migrate to new 4S phones.  I install itunes and authorize the PC for my apple store account (AppleID), then connect the phone.  The "encrypt backups" option is checked by default.  If I try to uncheck it it asks for a password - I have never set one, this is a fresh install.  No backups have ever been done.  I can right click the device and choose "backup", and it does take a backup.  When I try to restore it to the 4S it asks for the password.  I have never set one.  I uninstalled and reinstalled itunes, and repeated the exercise on another PC.  Same deal.  "encrypt" is checked by default and needs a password to turn it off, but I have never set one.
I have tried the lock code for the phone, the apple id password, the passwords of every email service on the phone, and the windows password.  None work.  I have tried about 500 other random words but nothing works.  If I go into iTunes preferences/devices it does not show any existing backups as being present.
So, I cant turn off encryption, and I cant restore any backups that I take.
Anyone got any suggestions?  It makes no sense to me at all.
Thanks

From this support document http://support.apple.com/kb/ht4946
iTunes and encrypted backups
In the iTunes Summary screen, select "Encrypt iPhone backup" if you want to encrypt the information stored on your computer when iTunes makes a backup. Encrypted backups are indicated by a padlock icon, and a password is required to restore the information to iPhone. You may want to write down the password for your backup and store it in a safe place. If you use a Mac, when you set a password you can select to store the password in the keychain. With iOS 4 and later, you can transfer the iOS keychain backup to a new device if you encrypt the backup.
Warning: If you encrypt an iPhone backup in iTunes and then forget your password, you will not be able to restore from backup and your data will be unrecoverable. If you forget the password, you can continue to back up and use the device, however you will not be able to restore the encrypted backup to any device without the password. You do not need to enter the password for your backup each time you back up or sync.
If you cannot remember the password and want to start again, you must perform a full software restore and when iTunes prompts you to select the backup from which to restore, choose set up as a new device.

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