It seems that I found a fix...
I am not including the kix32.exe in the package, but rather, just making sure it knows where it is on the machine.

OLD WAY
kixcrypt -f c:\nwsutil\kix32.exe -e "%KIXCRYPTDIR%\kix32.exe %KIXCRYPTFILE%" kixadmin.scr

NEW WAY
kixcrypt -e "C:\NWSUTIL\kix32.exe %KIXCRYPTFILE%" kixadmin.scr

Using it this way keeps that error message from coming up, and seems to be more reliable on all the machines I tested.

Thanks again Richard.