Note that you can also explicitly set the MACHII_APP_KEY variable to your application name as opposed to relying on the directory name and this will also fix the problem:
<cfparam name="MACHII_APP_KEY" type="string" default="#GetFileFromPath(ExpandPath('.'))#" />
So I wanted to take a moment to thank Brandon for notifying us of the bug and doing quite a bit of work to help us come to a quick rationale behind and resolution for the bug. Without the diagnosis and sample apps from Brandon this would have taken a lot longer to figure out, and due to his work all Mach-II users will benefit from Peter's fix to a bug that would likely bite others from time to time. Another great open source success story. Thanks again Brandon!
<cfset MACHII_APP_KEY = "whatever" />