Access denied on edited offline files

I have a client where Windows XP offline files have gone awry.  This is a big problem as almost the entire company's employees are laptop users that do a lot of traveling.

While in the office and when they are working online with the server, they have no trouble whatsoever in any of the folders that are available offline.  They can create, delete, modify, rename, move, and open files in those folders.  Also, when they are offline they can do the same however the problem is that when they go to synchronize their modified offline files, they receive a message that the server copy was deleted and what do they want to do with their local copy.  I have them choose the option that keeps it and syncs it back to the server, but the synchronization ultimately fails and there are Access Denied failures in the synchronization errors pane for every one of the altered files.  If they go to the path of the files, they are all missing; however, if they go offline then the files are present.  If you look on the file server, the files are not present.

I have been able to work around this issue by going offline, moving the files that are complaining to a non-offline folder, going online and synchronizing, then putting the files back in their original place.  However, it just happens again next time they go offline and modify files.

As far as I know, none of the users are encrypting their offline files cache (I know for a fact that one I've been using as an example is not).  It is a one server domain environment, upgraded from a peer-to-peer workgroup.

Here are some details about the environment:

Server OS:  Windows Server 2008 Standard SP2 x64
Roles:  AD, DNS, DHCP, WSUS, backup, file & print
Folders offline:  User's My Documents folders (and all subfolders except My Pictures), two shared folders
Folder share permissions:  Global Security Group containing all of the company employees has Full Control
NTFS permissions on root of share:  Domain Local Security Group has special permissions on this folder only (List Folder / Read Data, Create Folders / Append Data).  Sole member of this group is the Global Security Group containing all the employees as mentioned above.  SYSTEM has Full Control on this folder, subfolders, and files.  CREATOR OWNER has Full Control on this folder, subfolders, and files.  Administrators has Full Control on this folder, subfolders, and files.

Client OS:  Windows XP Professional SP3
Notes:  All users are local administrators on their respective machines.