Turns out that it is a bug. I went through the IPB code and json_encode returns false on line 2352 in cp_skin_templates.php. This happens because my last name contains the letter Ø. Everything works as soon as I remove my last name from the skin author field.
The issues I posted about above happen because I still have the "IPB Internal" enabled as a fallback since a lot of the users only exist in the forums and not in the master app. IPS.Connect seems to be just as half-assed as IP.Converge.
I have created a custom master application (and my forum is the slave) and I'm wondering if what I'm experiencing is normal behaviour.
When a user registers in the master app and tries to login to the forums before activating their account it just says " Username or password incorrect. " I send the "VALIDATING" status along with the "connect_revalidate_url" so shouldn't the forum tell me to activate my account instead?
Also if someone registers in the forums and the master app is offline then the account will be created anyway. Shouldn't a slave app fail if its unable to talk to the master?