Security settings on this doc prevent signing

I created a form with interactive fields. 1) in security settings it says "no security" 2) under Advanced, I "enabled usage rights in Adobe Reader" 3) opening the pdf in Reader X I clicked on the "Sign" button at the top 4) I get the "The security settings on this document prevent adding text ...." pop up in the Sign Pane. 5) I checked the security properties in Reader and it shows everything is allowed. ?????

First, what is a digital signature? It's a cryptographically sound operation that provides two important pieces of information. It takes a snap-shot of the document at signing time to provide a test of document integrity (if someone were to try and modify the snap-shot it would invalidate the digital signature), and it provides assurance that whomever signed the document is who they say they are.
The question you have to ask yourself is, do I need that kind of security? That is, do I need to ensure the signed portion of the document has not been modified, and is the person that signed the appropriate person for approving the document?
If you decide that yes, you need the security and assurances that a digital signature provides and you can't control what application the signer may be using (i.e. either Acrobat or Reader) then you need to enable the file to be signed in Reader (it can always be signed in Acrobat). In order to enable signing in Reader using Acrobat Pro 10.1.4 do the following:
Open the file you want to enable for signing
Select the File > Save As > Reader Extended PDF > Enable Additional Features menu item
Click the Save Now button on the Enable Usage Rights in Adobe Reader dialog
Supply a name and location and then click the Save button on the Save As dialog (note: you can save over the existing file)
Another question you have to ask yourself is do I care where the signature is placed on the PDF file? If you want to control the location of the signature appearance then you need to place the signature field as you noted above. On the other hand, if you don't care where the signature is placed then don't create a signature field and let the signer inscribe a signature field somewhere on the document at signing time. By the way, the document layout (placement of signature fields) should be finalized before you Reader Enable the file.
Steve

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