Powershell script to pull users from an ad group and create folder with permissions

Untested but how about something like this:

$acls = @{};
Get-ChildItem Template |
    Where-Object { $_.PSIsContainer } |
    ForEach-Object {
        $acls[$_.Name] = Get-Acl $_.FullName ;
    }

Get-ChildItem Folder2 -Recurse |
    Where-Object { $_.PSIsContainer -and $acls.ContainsKey($_.Name) } |
    ForEach-Object {
        Set-Acl $_.FullName $acls[$_.Name] ;
    }

Presumably you're not playing around with "Deny" entries and you're just adding permissive "XXX Group / Read and Execute" type permissions (or something similar). If you are playing around with "Deny" permissions, stop doing so. Concentrate on granting permission to the resource. Anyone not named in the permission is implicitly denied access, so you don't need to put in any "Deny" entries (except in corner-cases which, typically, aries because of bad folder hierarchy and permission design).

After you've added the user to the group you'll need them to logoff and logon again for the updated group membership to take effect. Have you had the affected do that?

It's not necessary to have them logoff and logon again when you change the permissions, but the user's group membership list is only built at logon.