Cannot add Domain local groups to NTFS permission lists

I have a Windows 2003 member server with shares and user data on it. I am
trying to set the NTFS permsisons on these user data folders.

I have added the necessary user accounts to a Domain Global group, and have
added the domain global group to a domain local group. I am trying to add the
domain local group to the NTFS permissions of the user folder share.

However, when I click on add and type in the name of the domain local group,
I get that window that says the group cannot be found, and prompts me to type
in another name instead. In fact, I can't give NTFS permissions on any folder
to any domain local group because no domain local group can be found.

I thought domain local groups were supposed to be used when assigning
permissions on domain resources? So why when I go to to do that, Windows
tells me that any domain local group I want to use cannot be found? Right
now, when assigning NTFS permissions to folders, i can only use global groups
or user accounts.

Some other info, in case it is relevant:
Domain functional level is Mixed mode (Windows 2003 DC's)
Forest Functional level is Windows 2003 interim.