"Inherit Permissions From Parent" doesn't work

Question

In OS X 10.5 server, selecting the option for an AFP share to inherit permissions from its parent does not work for users on OS X 10.3. All files created by users running 10.3 have 755 permissions, regardless of the parent folders permissions.
Clearly, this rather dramatically reduces the utility of AFP in 10.5 Server for anyone with users running OS X 10.3.
OS X 10.3 server did not have this problem.
Manually propagating permissions is futile for two reasons. First, the needed set of nested permissions is complex enough that propagating them manually would take hours, and secondly there would be intervals between the propagations when documents would not be accessible to the right people.
Consider a drastically simplified example:
Imagine a share named "Share" with a folders inside it named Admin. Inside the Admin folder might be two additional folders named Accounting and Personnel. Inside Personnel there are folders named Performance Review and Forms. It would look like this:
Share
-- Admin
----- Accounting
----- Personnel
-------- Performance Review
-------- Forms
Now consider several groups: Employees, Accounting, HumanResources
Employees should have read write access to Share, and everything under it unless more restrictive permissions are explicitly created. Only the Accounting group has access to Accounting, and everything in Accounting should only be accessible to Accounting. Performance Reviews should only be accessible to the HumanResources group, but Forms should be accessible to all Employees.
Now a member of the employees group saves a new file in the Forms folder, but the group doesn't have, and needs, read/write privileges. To fix this the permissions from Share can't be propagated to all the files and folders inside it because that would nuke the special privileges for Performance Reviews and Accounting.
It might be conceivable that every n minutes a script could run that would recurse, depth first postorder, through the hierarchy assigning all files in each folder the permissions of the enclosing folder, but there are at least two problems with that. First, it would be slow and between runs the files wouldn't have the right permissions. Second, sometimes we might want a file to have special explicitly specified permissions that differ from the parent, but it would be terribly cumbersome to specify the exceptions for this sort of script.
POSIX behavior also doesn't solve the problem because it will set the same permissions as we're seeing already, there's no obvious way to change the default permissions, and doing so would have security implications elsewhere on the server if that "umask"ish setting couldn't be specified exclusively for the share.
Inherited permissions would solve the problem, and have solved the problem under past versions of OS X server, but they don't work on 10.5 with 10.3 clients.
Does anyone know of a workaround or have any additional details?

Answer 1

glad someone else is experiencing this, I'm having the same problem with inherit from parent.
I was going to start using inherit because Leopard has ruined ACL's, Leopard clients don't honour the deny delete subfolders and files ACE, basically the leopard permissions systems seem to be flawed