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Group Policy applying but not changing settings :(

Thank you for this urgent help. Auditors checking this out tomorrow morning.

We have a GPO that sets the eventlog audit settings for success or failure security events. The scope is set to Authenticated Users.

When I run the group policy wizard in GPMC it shows the settings applying to one of our servers in that OU.

When I run gpresult/z from that server it shows the policy applying to that server.

But when I go into gpedit.msc the security audit settings are all set to "not defined" and they are grayed out so I can't edit them manually.

As a test I set the GPO to deny applying to that server. I ran gpudpate/force on the system and then gpresult and it shows the GPO now not applying. But the settings are still set to not defined and still not editable. they are not being set by any other GPO.

In the event logs I only see three GPO errors but they are unrelated. A separate GPO is having issues creating user accounts. No other GPOs apply.

Quick help would be fantastic.

Server runs on Windows Server 2008 R2 (I can edit GPO but not the domain ones and I don't have access to the domain controllers).
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But when I go into gpedit.msc the security audit settings are all set to "not defined" and they are grayed out so I can't edit them manually.
There's your problem. gpedit.msc is used to modify the Local Computer Policy, not policies in Group Policy. You need to use the Group Policy Management Console (or GPMC for short) to modify the Group Policies.

If you don't have access to the Domain Controller and need to modify GPOs from your 2008 R2 server then you can install the GPMC through Server Manager. See this article for the steps to do this: http://technet.microsoft.com/en-us/library/cc725932.aspx
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Figured out answer on my own. See above.