Well, you can, but it s abit of a hack.
Firstly, you know you can encrypt sections of a config with a command line tool, and VB will auto decrypt them when it uses them. THeres usually a load of google noise about the issue but if you turn up nothing let me know
But the answer youre after? Well, here's the hack:
After you have designed your app, got the datasets designed etc, there is nothing stopping you from changing the ConnectionString setting to User scope rather than application scope. It thus becomes readwrite rather than readonly, to your code. Set the text of it to be "hi mum" or something, and then in code, BEFORE you do any DB access, put it to the correct value for the database.
This removes sensitive info from the config file. I struggled for a while trying to add the password into the conn string if i said "No, leave sensitive info out of the settings file" during the dataset wizrd thing.. Then I came to realise that APplication and User settings are not distinct in the My.Settings.. so the tableadapters shouldnt care if the setting is user scoped or app scoped.. it jsut goes for it by name. If it uis user scoped it is editable to your code, so get it from wherever you wanna keep it, in code, before your TA tries to access it.
Note i said you have to finish designing your app.. The designer has some issues with using the setting if it is user scope, i dont know why, but mine errored and crashed all over the place. I now leave setting the COnnStr to user scope to be the last thing I do.
Be careful not to save the setting too! Maybe add some code to the settings so that, when saving, the text is set back to "hi mum" to prevent security problems