You're not setting it up wrong, you just don't understand how the process works... let me try and help:
- Right now once you create an application it is open for anyone and everyone to fill out (the general public).
- dkpsystem then takes the submitted application and converts it into a forum post. In your case the application engine posts the thread into "Applications"
So in other words, the individual entering and submitting the application never needs to be able to access the forums at all.
Note that by setting the "Applications" thread tag to Non-Member you have effectively opened up the applications threads to the general public. It should probably set to at least member, if not officer.
There is discussion around changing the way this works in
this thread. Feel free to give it a read and provide your input. I personally do not see the point of having every random joe that fills out an application (I deny more than I accept) also have an account that I later have to prune, but that's just me.