Default geodatabases can be either file (.gdb) or enterprise (.sde). Attempting to set the path to a non-file or enterprise gdb is ignored. Set DefaultGeodatabaseOption to OptionSetting.UseCustom after setting the CustomDefaultGeodatabase (to use the CustomDefaultGeodatabase with newly created projects). Attempting to set the DefaultGeodatabaseOption to UseCustom before CustomDefaultGeodatabase contains a valid path will be ignored.
Conversely, attempting to set the CustomDefaultGeodatabase back to null or empty string will be ignored if DefaultGeodatabaseOption is currently set to UseCustom. DefaultGeodatabaseOption must be changed to UseDefault first.

Reference

GeneralOptions Class
GeneralOptions Members