File Level permission within W2k3 server AD not reaching sub-folder level

Using Group Policy editor , attempting to apply file level permissions to folders and subsuquent low level folders and files. At the conclusion of the process the permissions appear to be set however, when attempting to access the sub-folders it would appears that the process stopped only a the Root folder level. The Everyone group has be deleted for the folder permission list. What could be suppressing the propergation of file access? What should be done?