I'm not entirely sure that Profiles will work with Crystal - I think they may be mainly for Webi or Crystal for Enterprise reports that are based on a universe, but I may be wrong. I always use a "dynamic recipients" report in publications that use Crystal.
Also, you need to make sure that you have the access rights to create publications. You might want to see whether you can create one in your Favorites where you should already have those rights. That would show that it's a security issue if your trying to create one in a public folder.
-Dell