I assume that the folder is shared at the level of \\server\folder1 with a group, lets call it [i]groupies[/i] having full access at the share level. Further, the [i]groupies[/i] group has the appropriate NTFS permissions. Now, you are trying to deny access to the folder2 directory to all but a subset of users in the [i]groupies[/i] group. There are a few approaches:
First is to create a new share in a different location on the server called \\server\folder2 to which only a group , lets call it [i]subgroupies[/i], have the appropriate rights. This would be my first choice.
OR
You could create a group, lets call it [i]deniedgroupies[/i] and place everyone whom you do not want to have access, and explicitly deny NTFS rights to the folder.
OR
A third option, you could remove inherited rights from the folder2, grant [i]subgroupies[/i] the appropriate NTFS rights to folder2.
Remember that when determining which level of rights applies when working which share level and NTFS level, it is always the most restrictive rights always apply. Therefore to simplify things, I would keep the share level rights as Full Access and use NTFS rights to restrict.
I hope this helps.