As far as the 'raw sockets' problem is concerned, that is probably because you have a patched Windows XP box.... Microsoft 'removed' raw sockets support from the O/s for some of the stupidest reasons ever.
It basically makes the operating system a plastic toy as far as networking and security guys are concerned.
Ethereal will be much better for your sniffing needs though.
Btw, what traffic are you looking to encrypt, and how are you encrypting it
