permit a user to access a selected folder only (Active directory 2003)
Solution 1:
You need to stop the newly created directory from inheriting NTFS permissions from its parent directory.
To do that, you should uncheck the Allow inheritable permissions from parent to propagate to this object checkbox. You will then be prompted whether to Copy the parent directory's permissions to your new directory, or to Remove all permissions. You can then remove the ACL entry referring to MACHINE\Users.
See MS KB313398 for more info.