It is correct that BOTH the form action AND the encoding type are automatically changed, when you use the "Use Built in ...." option.
What is NOT normal, is that it then comes to an error when you submit.

Please clone the page and save / publish as entryform1.php so i can see what / if it gives an error.
Please also post the thankyou page and error page URLs as you have created / published them and as you have typed them in the relevant fields, in the Form Dialog Box.

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