JSI Tip 8409. When you attempt to create a new folder in a disk volume on Windows 2000, you receive 'Error Applying Security'?

When you attempt to create a new folder in a disk volume on Windows 2000, you receive:

Error Applying Security
An error occurred attempting to read the directory:
<Drive:>\FolderName

This problem can occur if the Reset permissions on all child objects and enable propagation of inheritable permissions box is checked for the new folder, because the new folder inherits the access control setting from the disk volume, which overwrites any settings at the folder level.

To prevent this behavior, DO NOT check the Reset permissions on all child objects and enable propagation of inheritable permissions box in the Access Control Settings for New Folder dialog when you create a new folder in a disk volume.