Well I haven't found out how
this bug works, but I found another bug in the process.
1)Make sure that the master password is NOT saved to disk (set to "Do not store Master Password")
2)enter some dummy password (like "password")
3)Check the hide master password box under General Settings
4)Switch the drop-down menu under the master password (show asterisks) box to "Save to memory and disk")
5)Switch the drop-down menu to one of the other options (thereby removing it from disk)
6)Since the hide master password box unchecks, you can never get rid of the "Show Asterisks" box (unless you edit your .rdf file)