Group policy block inheritance not working

Hello all,
I am experimenting with terminal server and thin clients.
I have an OU setup with the terminal server in it and restrictive policies setup with loopback set on the policy.
The problem is that even when I login as an admin it loopbacks…like it is supposed to. So I created a sub OU in the OU with the terminal server and set that OU to block inheritance and put the admin account created to manage the terminal server in it. It does not block the policy, it still gets applied. I even had a policy to counter the restrictive policy and applied it to the OU with the admin account in it. That did not work either.

Please help. TIA.