After installiing Internet Explorer 7 cannot add sites to trusted sites after GPO applied

Has anyone encountered this problem with IE7? Our site has Windows XP 2 SP2 with all of the lastest updates:

Originally a GPO was created to add a few sites into IE6 Internet Options/Security/Trusted Sites/Sites. The path in the GPO as follows: Computer Config/administrative templates/Windows Components/Internet Explorer/Internet Control Panel/Security Page/Site to Zone assignment list

After the installation of Internet Explorer 7 the sites defined by the GPO appeared under Internet Options/Security/Trusted Sites/Sites in the zone as they normally do. However, we discovered that sites cannot be manually added in because the buttons have been greyed out. Before the Trusted Sites Zone was accessible with Internet Explorer 6.

We checked and there are no other top-level GPOs that are inherited.

Is this a known issue with IE 7 or some sort of bug?
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sysadmin81Connect With a Mentor Commented:
Have you ran a gpudate /force on one of the machines after you changed the settings?  Since it affects your entire domain, I'm putting my money on a GPO setting that is incorrect.
Please check your GPO/Registry for the following settings:

Computer Configuration\Administrative Templates\Windows Components\Internet Explorer\Security Zones: Use only machine settings

The Security_HKLM_only DWORD value exists, and it has a value of 1
techabaAuthor Commented:
Hello sysadmin81,

I neglected to mention that this particular issue affects our entire domain of over 300 workstations. I've gone through looking at the values and changing them with no results.
I do not know why you are being restricted to locally adding trusted sites, but one way around it...

This app enables grayed-out options on just about anything.
MotoCrazyConnect With a Mentor Commented:
Found this and may be worth a shot. Test it on one machine and if it works, you can push a .reg to the domain.

HKLM\Software\Policies\Microsoft\Windows\CurrentVersion\Internet Settings

Edit REG_DWORD for the following to value of 0
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