So I am trying to store the symmetric key using DPAPI. All is well and great, but what to do with the entropy? This answered question here really doesn't provide enough insight. It seems like a slippery slope - I could use the machine store to store the entropy but then what prevents someone from getting at that as well? Note: I am storing the current key using the User Scope.
So my question is - what is the best way to store the entropy using DPAPI?
Anything you store locally can be compromised. But there are steps you can take to make it more difficult. There is a document on Handling Passwords that you may consider looking over. You consider your Entropy Key a password specific to your application.
I am going to refer to your Entropy as your Key, since it is functionally an additional key.
What you don't want to do is store your key locally in an unencrypted format. Instead you want to either encrypt your key, or derive it from another, in-obvious source. Of course if your encrypt the key, then you need to store the key used to encrypt it - but often times this single layer of indirection is enough to discourage most challengers.
That would be the advantage of deriving your key. You could derive it as a hash of some other piece of constant data (needs to be something that doesn't change with revisions of your application). One trick when deriving a hash though is to combine the hash with some other constant value (like a GUID or large random number) so that someone else cannot just combine a known hash algorithm and get your key. This is a much better alternative to creating your own hash algorithm (which you should never do, unless you have a PHD in Mathematics).
At some point your are going to need some sort of key hard coded in your application. This key is either combined with some other data in a hash to create your Entropy Key, or used to decrypt the entropy key. You actually can have the key change with a new revision of your application, as long as you keep the old key for decrypting the existing key. Then you can re-encrypt it with the new key or method.
If you want the best security then you can store the Entropy key off the computer. This would require an internet connection and an SSL certificate, but then they key is never persisted anyw