Yes, your new machine key will be embedded in your web.config. As you upgrade mojoPortal, you will need to remember to replace the default value in web.config with your custom key each time, and if you were to move to another server, you can carry that value with you as well. As long as the key in web.config is the same one that was used to encrypt the data in your database, everything will work properly.
Someone from Arvixe should be able to help you with the file permissions question.
Jamie