When I open the DirectX control panel and open the Direct3D 9 tab and set "Use Debug Version of Direct3D 9" and hit "OK" or "Apply," there are no errors. If I open the control panel again, it is back to "Use Retail Version of Direct3D 9." When I try to debug my application, I don't get any output from Direct3D.
When I last did this a few months ago, everything worked correctly and I got debug output.
Running the control panel as Administrator doesn't seem to make a difference and the registry key mentioned here http://www.gamedev.net/topic/514529-cant-use-debug-version-of-direct3d/ is set to one.
What else can I try?
Same thing happened to me. It looks like that TrustedInstaller took ownership of some registry keys (including HKLM/SOFTWARE/Microsoft/Direct3D which dxcpl modifies).
Found a solution here. You just have to change ownership of that regkey.