Encrypting string through CryptAPI

We are attempting to encrypt/decrypt a string through CryptoAPI functions passing a known string key

Encrypt
======
// Get handle to user default provider.
      if (CryptAcquireContext(&hProv, NULL, NULL, PROV_RSA_FULL, 0))      
      {
            // Create hash object.            
            if (CryptCreateHash(hProv, CALG_MD5, 0, 0, &hHash))            
            {
                  // Hash password string.                  
                  dwLength = sizeof(TCHAR)*_tcslen(szKey);
                  if (CryptHashData(hHash, (BYTE *)szKey, dwLength, 0))                  
                  {
                        // Create block cipher session key based on hash of the password.
                  if (CryptDeriveKey(hProv, CALG_RC4, hHash, CRYPT_EXPORTABLE, &hKey))                        {
                              // Determine number of bytes to encrypt at a time.
                              dwLength = sizeof(TCHAR)*_tcslen(szdata);      
                              bResult = CryptEncrypt(
                                          hKey,            // Key obtained earlier
                                          0,               // No hashing of data
                                          TRUE,            // Final or only buffer of data
                                          0,               // Must be zero
                                          NULL,            // No data yet, simply return size
                                          &dwLength,         // Size of data
                                          dwLength);         // Size of block

                              // Allocate memory.
                              BYTE *pbBuffer = (BYTE *)malloc(dwLength);                                    if (pbBuffer != NULL)                                                      {
                                    memcpy(pbBuffer, szdata, dwLength);                                          // Encrypt data
                        if (CryptEncrypt(hKey, 0, TRUE, 0, pbBuffer, &dwLength, dwLength))                         {
                              // return encrypted string
                              memcpy(szEncryptData, pbBuffer, dwLength);}
........      
                               CryptDestroyKey(hKey);  // Release provider handle.      
                        ......
                  CryptDestroyHash(hHash);
            ........
            CryptReleaseContext(hProv, 0);      


Decrypt
=====
if (CryptAcquireContext(&hProv, NULL, NULL, PROV_RSA_FULL, 0))            
      {
            // Create hash object.                  
            if (CryptCreateHash(hProv, CALG_MD5, 0, 0, &hHash))
            {                        
                  // Hash password string.
                  dwLength = sizeof(TCHAR)*_tcslen(szKey);
                  if (CryptHashData(hHash, (BYTE *)szKey, dwLength, 0))                                          {
                        // Create block cipher session key based on hash of the password.
            if (CryptDeriveKey(hProv, MY_ENCRYPT, hHash, CRYPT_EXPORTABLE, &hKey))                                                {
                              // we know the encrypted data  and the lengt
                        dwLength = sizeof(TCHAR)*_tcslen(szEncryptdata);      
                         _tcscpy(szdataTemp,szEncryptdata);
                  if (!CryptDecrypt(hKey, 0, TRUE, 0, (BYTE *)szdataTemp, &dwLength))
                                    bResult = FALSE;      

                              ......
                              CryptDestroyKey(hKey);  // Release provider handle.                                    _tcscpy(szdata,szdataTemp);
                        }                              
                        .....
            .....
            CryptReleaseContext(hProv, 0);      


A string of 497 bytes gets compressed to 426 bytes on encryption;But while decrypting the length of the original string retrieved is 426 only - and we get just that much of the original string back!!!!!
I am a novice in cryptology and need help in gettign out of this.