File Access Denied

The Top level "USERS" folder in which all the individual user folders are
- SERVER\Administrator - full control not inhereted
- Authenticated Users - Read Execute, List Folder and Contents, Read
- DOMAIN\Domain Admins - Full Contol
- SYSTEM - Full Control

At the user level folder:
- SERVER\Administrator - full control not inhereted
- DOMAIN\Domain Admins - Full Control
-DOMAIN\UserName - Full Control not inherited

Do you have the "USERS" folder set to be shared (ie. little hand overaly on the folder)?  If so, it shouldn't be.  

Also, did you put a $ at the end of each share name for the private folders?  You should do that if not.

So, for the specific folder, what do you have as the share name, and how are you typing the share in?  For example if the Server's name is "SERVER" and the user's folder's name is "FOLDER", and considering the "USERS" folder shouldn't be shared.  Here's what you should be looking for when attempting to connect to the folder from the end user's computer:

\\SERVER\FOLDER$
Please take note    ^    Dollar sign is at the end.  I also left the "USERS" folder out of the equation in order to keep each user's folder off of a directory that is directly connected to the server's root directory.
http://technet.microsoft.com/en-us/library/cc787768.aspx   <  explains it all.  

I believe we've got you fixed.  Please let me know how this works for you.  

******   I would also consider clicking the properties of the user's private folder.  Click the Sharing Tab.  Click the Permissions button.  Make sure that the settings in there are accurate as well. ********

Thanks. This is what I have:
\\SERVER\USERS\USER_PERSONAL_FOLDER

I have USERS shared. It is the only top folder that is shared. You are saying that I should not share USERS folder. What permissions do I have to set up on USER_PERSONAL_FOLDER for each user then?
Thanks.

Just share each folder individually and make the share name have a dollar sign at the end.

So, right click on each user's folder.  Click Properties.  Click Sharing.  Remove the share you've setup thus far.  Then recreate the share again, but this time put a $ at the end of the share name.  Then, click the Permission's button.  Chose who can do what here.

Surely, this is where we clap.... :)

What permissions should I set up for the top USERS Folder?
Thanks.

It seems like the only time they can access their folder in the top USERS folder is when I set up full control for them on that main folder.

If the "USERS" folder is set as shared on the network, remove the share completely.

Do me a favor.  Go to My Computer.  In the address bar, type:
\\YOURSERVERNAME and hit enter.  Now, as we're looking at this, note that we're not exposing a folder that says "USERS".  Why?  Beause if we let everyone access users, they'd be able to see every single user folder that has an open share.  Regardless if they have permission to access it, we don't want to expose that.  This is why we put the $ at the end of the share as well.

So, the USERS folder isn't setup as a share, nor is it setup with permissions for any standard domain user.  You can do this any way you want, but the key here is to put a $ at the end of the share.

Sorry.  I was doing hardcore multitasking while I wrote that.

Thanks. I understand that. But everybody who is a little bit computer savvy knows how to look for hidden folder and shares. My problem is that users get denied access as I had stated earlier. Right now I have full control for domain users, which is not what I want to accomplish here.
Please advise me on permissions.
Thanks.

I am going to draw a picture for you.   Give me ten minutes.

Thank you. Is there a way to create a bat file for the users to link them automatically to their respective shared folder? How can I accomplish it?
Please advise. Thanks!

DIstribute points.  That's a new question.