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I have a user that has rights to change permissions within a certain folder on a Windows Server 2003 network share. Although I grant this person the rights to change permission and ownership this person cannot change any permissions.

The network share is also set to allow everyone full control. (I understand it is bad practice yet this is how it was first configured)

Is there any reason why this domain user cannot modify permissions on the folder and files they create?

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if you micromanged the permissions you may be missing something, have you tried giving them full control to the folder as a test? – tony roth Jun 15 '10 at 19:00
up vote 0 down vote accepted

Make sure there are no deny acl's on the folder as these take precedence over acl's giving rights. You can also generate the effective permissions on a specific user in windows explorer in the security tab to see if that tells you why it is being denied.

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Thanks. I also learned that only subfolders and files are affected by the top folder permissions but not the top folder itself. – Ishmael Jun 21 '10 at 15:58

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