If you want to run Armory on testnet, you'll have to disable auto-bitcoind and run Bitcoin-Qt or bitcoind in testnet mode manually. And especially confusing is the fact that Armory and Bitcoin-Qt/bitcoind use inconsistent command line arguments. For instance, you use "-testnet" flag with Bitcoin-Qt/bitcoind and "--testnet" flag for Armory (yes, one slash for bitcoin, two slashes for Armory). To be more explicit:
- Armory.exe --testnet
- Go to settings, unselect "Let Armory run Bitcoin software in the background"
- Close Armory
- bitcoind.exe -testnet
- Wait for it to synchronize
- Armory.exe -testnet
Due to some quirks in the path resolution, if you want to use a custom directory for Armory and Bitcoin, the --datadir and --satoshi-datadir arguments are inconsistent. For instance, if you moved both your bitcoin home dir and your armory home dir to F:\Bitcoin and F:\Armory, respectively, do the following:
bitcoind.exe -testnet -datadir=F:\Bitcoin
Armory.exe --testnet --datadir=F:\Armory\testnet3 --satoshi-datadir=F:\Bitcoin
The problem is that Bitcoin-Qt expects the base bitcoin home directory, even for testnet, and will add the "testnet3" for you. If you specify F:\Bitcoin\testnet3, it will run in F:\Bitcoin\testnet3\testnet3. But I did not realize this when I setup the code for processing arguments, and Armory requires explicitly specifying the full path.