It's a hokey workaround, and I still hold out for the "right" way to do this, but I managed to get this working by converting the password value to a hex value and sending that value to the sql server, then decrypting it there.
$password = bin2hex( 'encryptedpasswordstring' );
$results = DB::update("update Users set
Password = convert(varchar, 0x" . $password . ")
where UserID = ?", array($userid);
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