Change folder permissions on 2008 terminal server

Question

I have a Windows 2003 R2 domain controller and a 2008 SP2 terminal server. How can I give a group MYDOMAIN\MyGroup custom permissions for the TS's C:\example directory? When I try to add a user or group in C:\example's security properties, the location field is not changeable from TermServName and MYDOMAIN\MyGroup is never found.

Answer 1

Are the DNS settings on the 2008 SP2 term server pointing at the IP of the 2003 R2 domain controller? That's what I usually see when the domain is not listed as a location.