I know you've managed to downgrade to XP at this point. But just for completeness' sake (and in case you ran into this same problem under XP), I wanted to answer this question.

In Windows, there are two levels of protection for files on a shared drive.

There are the permissions you set for the share itself. This controls who can connect to that share across the network, and what the base level of access is when they connect. This is set from the properties panel of the SHARE. For instance, if you create a share called Wilma and set Fred's permissions on that share to read-only, and set Barney's permission on that share to read-write, then Fred is sad because he can only watch what Barney does to Wilma.

Then there are permissions on the hard disk's files and folders themselves. Those are set by right-clicking on a given file or folder and getting properties then selecting the SECURITY tab. These are more granular than the SHARE level of security, and can frequently conflict with what you've set for the security of the share. For instance, if Wilma has sub-folders named TORSO and HEAD, you can set Barney and Fred's permissions on those folders to read-only and read-write, respectively. Keep in mind that no matter what you set the file permissions on those folders, Fred still has only read-only access to the SHARE so that's still the most he can do. And even though Barney has read-write access to the share, if a folder or file isn't tagged so that Barney has write access, he'll still be given "permission denied" when he tries to do something other than look at Wilma's body parts.

I think this is a bigger issue in Vista than it was in XP because by default, they have beefed up security on individual files and folders across the board. There's actually a pretty big Vista annoyance where I can't even browse the folder tree from the root of C:\ and get to my personal files and folders in my User folder without getting permission denied. I have to go in and recursively update the permissions on my user folder before I can do that.