Recently I have been having problem with SecureICA 128-bit encryption on Windows Server 2008 x64 with XenApp 5.0. The symptom (and how to replicate the issue) is like this:
1. Install XenApp 5.0 on a Windows Server 2008 x64 server
2. Publish a Desktop from the server
3. Publish an application (let's say notepad.exe) and force 128-bit encryption as the "Minimum Requriement" from this same server
4. Launch the published Desktop from any other Windows client you wish and forced 128-bit encryption from the ICA client
5. From the published Desktop remote session (which is a Windows Server 2008 x64 desktop), laucn Citrix Program Neighborhood from the Start Menu
6. Find an application set and points it to the same server
7. Try to launch the published Notepad.exe created in step 3 earlier, and..
You will NEVER be able to launch this application from the Citrix Program Neighborhood client. The message given will be something like "Higher encryption is required which this client does not support". No amount of tweaking on the client settings will get you pass this problem.
OK, even if you have the published application with high-encryption as the minimum requirement published elsewhere, such as from a CPS4.0 or CPS4.5 servers running Windows 2000 or Server 2003, you will still get the same error message and will not be able to launch it from the published Desktop.
I have reported this case to Citrix Support for more than 2 weeks...and they have yet come back to me.
Update 22-May-2009: Citrix has been able to simulate the problem and provided me a private fix to the PN client on May 14th. They have also mentioned that they will include this fix in the future service pack.
