I am trying to set up Single sign on for 2 websites that reside on the same domain
e.g.
http://mydomain (top level site that contains a forms-auth login page
Your forms section of web.config needs to be the same as well.
Quote from - Forms Authentication Across Applications
To configure forms authentication across applications, you set attributes of the forms and machineKey sections of the Web.config file to the same values for all applications that are participating in shared forms authentication.
The following example shows the Authentication section of a Web.config file. Unless otherwise noted, the name, protection, path, validationKey, validation, decryptionKey, and decryption attributes must be identical across all applications. Similarly, the encryption and validation key values and the encryption scheme and validation scheme used for authentication tickets (cookie data) must be the same. If the settings do not match, authentication tickets cannot be shared.