Ken,
This is how it is designed. I've raised this with SAP before and there is an idea on the Ideas Space for it (D25077).
Basically you have two workarounds:
1) Provide all users with the database account to the IS repository (bad)
2) Save the Crystal reports to BI, and hard code in the credentials (less bad) and mean that users still cannot access the OOTB reports in IS.
All I can suggest is to support the idea and hope that SAP fix it at some point.
regards
Adrian