Witch proofs you have to be very carefull setting NTFS permission, especialy when setting permission on system folders.
Sometimes changing permissions on folders have a irreverible negative effect on your system. Especialy when you change permissions on IIS folders or the SystemRoot folder, and don't even try it on Exchange Server folders. You'll be getting an headage comparing your permission agains another computer that still works. Believe me, I've been there
But, glad you solved it.