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Group Policy not working on 2008 R2 Domain Controller

We have recently added two 2008 R2 DC's to our domain and went through the process of updating our schema and everything else that it requires. We still have two 2003 DC's. Our forest and domain function level are at 2003. I can see and create group policies on all the DC's but the policies do not get created in the c\Windows\SYSVOL\sysvol\DOMAIN\Policies directory on the 2008 R2 DC's. They do get created in the directories on the 2003 DC's. All of the policies that existed when the 2008 R2 servers were promoted to domain controllers did copy over but any new policies do not get created in the sysvol directory on the 2008 R2 DC's. For now I can copy the directories for the new policies from the 2003 DC to the 2008 R2 DC but that is not acceptable since the 2003 DC's are going away. Is this because we are not at the 2008 function level for our domain or have I missed something?
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Darius Ghassem
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Can  you please run dcdiag on a 2008 DC then post results. This is not a normal.
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lnptech

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Results of dcdiag:

Directory Server Diagnosis

Performing initial setup:
   Trying to find home server...
   Home Server = DC1
   * Identified AD Forest.
   Done gathering initial info.

Doing initial required tests

   Testing server: Default-First-Site-Name\DC1
      Starting test: Connectivity
         ......................... DC1 passed test Connectivity

Doing primary tests

   Testing server: Default-First-Site-Name\DC1
      Starting test: Advertising
         ......................... DC1 passed test Advertising
      Starting test: FrsEvent
         ......................... DC1 passed test FrsEvent
      Starting test: DFSREvent
         ......................... DC1 passed test DFSREvent
      Starting test: SysVolCheck
         ......................... DC1 passed test SysVolCheck
      Starting test: KccEvent
         ......................... DC1 passed test KccEvent
      Starting test: KnowsOfRoleHolders
         ......................... DC1 passed test KnowsOfRoleHolders
      Starting test: MachineAccount
         ......................... DC1 passed test MachineAccount
      Starting test: NCSecDesc
         ......................... DC1 passed test NCSecDesc
      Starting test: NetLogons
         ......................... DC1 passed test NetLogons
      Starting test: ObjectsReplicated
         ......................... DC1 passed test ObjectsReplicated
      Starting test: Replications
         ......................... DC1 passed test Replications
      Starting test: RidManager
         ......................... DC1 passed test RidManager
      Starting test: Services
         ......................... DC1 passed test Services
      Starting test: SystemLog
         ......................... DC1 passed test SystemLog
      Starting test: VerifyReferences
         ......................... DC1 passed test VerifyReferences


   Running partition tests on : ForestDnsZones
      Starting test: CheckSDRefDom
         ......................... ForestDnsZones passed test CheckSDRefDom
      Starting test: CrossRefValidation
         ......................... ForestDnsZones passed test
         CrossRefValidation

   Running partition tests on : DomainDnsZones
      Starting test: CheckSDRefDom
         ......................... DomainDnsZones passed test CheckSDRefDom
      Starting test: CrossRefValidation
         ......................... DomainDnsZones passed test
         CrossRefValidation

   Running partition tests on : Schema
      Starting test: CheckSDRefDom
         ......................... Schema passed test CheckSDRefDom
      Starting test: CrossRefValidation
         ......................... Schema passed test CrossRefValidation

   Running partition tests on : Configuration
      Starting test: CheckSDRefDom
         ......................... Configuration passed test CheckSDRefDom
      Starting test: CrossRefValidation
         ......................... Configuration passed test CrossRefValidation

   Running partition tests on : lnpnews
      Starting test: CheckSDRefDom
         ......................... lnpnews passed test CheckSDRefDom
      Starting test: CrossRefValidation
         ......................... lnpnews passed test CrossRefValidation

   Running enterprise tests on : lnpnews.com
      Starting test: LocatorCheck
         ......................... lnpnews.com passed test LocatorCheck
      Starting test: Intersite
         ......................... lnpnews.com passed test Intersite
In the Event Viewer do get any errors for replication?
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That would do it. Glad you got it fixed.