Hi Neil....
the question i have is whether the "mocked up" display acls for the user and everyone should still be there???
No, the files/dirs should be switched to NTFS security by the act of setting the ACLs on them, and they should have on them *exactly* the ACL that you're setting, no more and no less. Note that you will still see the SecureShare tab on the Windows explorer "Properties" sheet, even for files that have an ACL, but the UNIX perms you are seeing there are not relevent when it comes to evaluating access to an NTFS mode file (in fact, you should find they are greyed out, for the most part). The ACL contents shown to you through the "Security->Permissions" dialog for a file should be precisely as you set them, and should not contain any entries (ACEs) that are derived from the file's UNIX permissions.
So, if you are seeing something different than the above, I'm afraid I'm stumped, so I would suggest opening a case with our support folks. You can do this very easily through NOW, and you can even chat with a support engineer electronically. Maybe they've seen something like this before and can make a call on what might be going on.
Keith