Windows 7 blocks network access to network-installed apps

Solution 1:

I know you think it doesn't have to do with your IE security settings, but I urge you to reconsider. The fact that your DFS share is an FQDN makes me suspect the issue detailed here.

http://support.microsoft.com/kb/303650/en-us

Solution 2:

This is actually a permission problem. Let me explain by an example:

Lets say your dfs share is \\dc.domain.com\share1 and on your fileserver the physical location of the share is d:\root\share1.

The group 'mygroup' should have access to share1 and you add "Full permissions" to the group on d:\root\share1. On d:\root you don't give it any access.

In that scenario you will not be able to do any network communcation from the share. But if you give 'mygroup' the "List folder / read data" advanced permission on d:\root, the problem goes away. If you don't want users to be able to list the content of the d:\root folder, just enable "Access-based enumeration".