GPO folder redirection – creates .tmp files

I am using a 2008 SP2 Small Business Server, and my test machine is Windows XP SP3.

I have setup a GPO to do folder redirection, but it is only sortof working.

The policy is applied to a security group, which my test user is a member of. They log onto the machine, and I see that the redirection folder now contains a Desktop and Documents folder. In the Desktop folder are some .tmp files, each 0 bytes. In the Documents folder are the folders I created, but instead of files, there are only .tmp files, each 0 bytes.

I have rebooted the machine, logged on/off, etc. Also have done gpupudate /force and logged off.

gpresult shows my GPO under Applied Group Policy Objects.

When I run Group Policy Modeling on the server, it shows my GPO under Denied GPOs, reason given is "Access Denied (Security Filtering)"

I've tried the WMI filtering on None, on "Windows SBS Client", and on "Windows SBS Client -Windows XP"

Delegation for the GPO was created automatically when I modified the scope, and the user (and it's group) have "Read (from Security Filtering)" permissions, which under advanced shows both Read and Apply group policy.

The GPO is link-enabled under the local domain, and is enforced.

I've tried everything I can think of to get this working, but clearly I'm missing something. Thanks!