Currently OpenAccess does not support generation of persistent classes inside web projects. You will have to create a separate Class Library project, generate the classes there and then reference this project from the web site. The process is fully described in this help topic
If you run the Enable project wizard for a web project (as you did), page 3 provides the option to add a connection string to the Web.config which will override the connection string used in the class library. When a project of type Class Library is being enabled, page 3 contains some additional controls that can be used to set the connection. In the near future we will provide support for having the persistent classes inside web applications as well. However, this will not be possible for web sites as they cannot be compiled to an assembly.
Besides that, the error you faced seems to be a bug in the wizard and is observed when the <assemblies> section of the configuration file contains comments. Thank you for reporting it, we will fix it for the next version of the product. Your Telerik points have been updated.
the Telerik team