After Security Change, Excel and Word file read-only or encrypted

[Guest]

We have one folder on our network that needs to be accessed by only a few
select people. It was inheriting the rights from the previous folder, which I
disabled to add only the few people that need access.

After this was done, files being opened from that folder (excel and word)
are popping up with an error message "Excel cannot access '-document name-'.
The document may be read-only or encrypted. Clicking ok, another message pops
up saying "Cannot access '-document name-'."

Right clicking on the file on the network, there is no Read-Only attribute
set, but even if I tried to put a check in the box and click ok, I get an
"Access Denied" message.

The file resides on a 2003 Server being accessed by XP Pro SP2 clients. I
found an Excel and Word error solution on Microsoft regarding changing the
Folder Options to "Windows Classic", but this did not work. It doesn't seem
to be related to the clients, but rather the file itself.

I even tried changing the security back to inheriting rights, and the same
problem exists. It's becoming very frustrating.. any help!?