Local Settings Manager won't retain settings

I took a closer look at this, and I see mostly what you're describing.

Global settings themselves are stored a directory down, and are preserved.

You'll see that this file persists:

C:\Users\username\AppData\Roaming\Macromedia\Flash Player\macromedia.com\support\flashplayer\sys\settings.sol

You can set coarse security preferences, like "Block all sites from storing information on this computer" or "Ask me before...".

When you create per-site settings, that results in a settings.sol getting created for each individual website, like I described above:

C:\Users\username\AppData\Roaming\Macromedia\Flash Player\macromedia.com\support\flashplayer\sys\<website>\settings.sol

Internet Explorer definitely deletes those.  This makes sense if you think about it, because retaining those settings leaves evidence of the fact that you use a particular website.  By choosing "delete browsing history on exit", you're expressing that you want no evidence of your web browsing activity to persist past the session.  If you really want to delete your browsing history, then you have to get rid of those directories, because they compose a list of at least a subset of the websites that you use.

So that's the deal.  There's a direct trade-off between privacy and convenience in this instance.  If you want your browsing activities to leave no trace, then you have to authorize things on a per-access basis.

I've moved this to a new thread, so that the people in the old thread (which had a totally different root-cause, and is already fixed) don't continue to get email about it.

Settings are stored in:

C:\Users\username\AppData\Roaming\Macromedia\Flash Player\macromedia.com\support\flashplayer\sys\settings.sol

If the settings aren't getting retained, that's typically because:

• That file is corrupted
• That file is getting deleted
    There are some "privacy" tools that delete this file. 
     Ironically, this has the effect of setting all of your privacy preferences to default again, since that's where they're stored.
• You lack permissions to modify that file
• You're in an enterprise environment where something complicated is happening, like your user folder is redirected to network storage.  If that's the case, your sysadmin might want to consider deploying a configuration with the EnableLocalAppData option enabled. 
  
  Details here:
  https://wwwimages2.adobe.com/content/dam/acom/en/devnet/flashplayer/articles/flash_player_admin_guide/pdf/flash_player_2…

So, I'd start with checking for and repairing any problems with the local filesystem:

Check your hard disk for errors - Windows 7:

https://support.microsoft.com/en-us/kb/2641432

If that doesn't help, then try deleting settings.sol at the location above.

If you can't delete it, you probably can't write to it, either.  Windows will either tell you about the permission problem that you're experiencing, or it will just fail.  In either case, something is wrong with the underlying system.  We don't install Flash Player in this instance, so there's not a lot we can do about it.

You can try uninstalling the last Windows Update that affected Flash Player, reboot, then reinstall it by running Windows Update.  This tends to fix a lot of problems where Flash-related files get damaged.  If that doesn't help, you might have to talk to Windows support.