WebWizard here, never fear I'm saving you time on your rear!
In response to the errors Jon posted a week ago.
The issue is in the WP Smush.it plugin, don't be fooled by the error.
In the file wp-smushit.php on lines 105 and 106, a call to register_setting() function is made incorrectly. In the current version (1.6.5) the call looks like this:
register_setting( 'media', array( &$this, 'smushit_auto' ) );
register_setting( 'media', array( &$this, 'smushit_timeout' ) );
And it should look like this:
register_setting( 'media', 'wp_smushit_smushit_auto' );
register_setting( 'media', 'wp_smushit_smushit_timeout' );
Making these changes on my own allows me to save the settings on the media settings page without error, and the settings all stick after the page is reloaded.
Hope this tid-bit has helped you all out.
I'm looking forward to seeing this issue fixed in version 1.6.6. :)