Under the security tab on the main folder you can see at the bottom a check box, and next to it, it says...'allow inheritable permissions from parent to propogate to this object.' - sometimes when permissions get mixed up and files get moved along they carry the parent permissions with it and...
Sometimes a USB peripheral can cause this to happen like with USB ADSL modems and twin-cpu machines.
It's just something to check, but i've seen it happen.
unhook as much as you can and see how long the pc runs for.
Also go into 'services' and either set to manual or disable altogether stuff you don't need like telnet and IIS (for the FTP service).
Kids can be real crafty......
About the policies: create a test group first of all and run the policies on that as a dry run....
Just a thought: are you on a switch as opposed to a hub?
If you are, you could try rebooting the switch as this will store old mac address info etc about your servers NIC and does sometimes cause problems.
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