Thanks Willy,

That helped some. I see the propagation now.

Took me a while to get this working right though nevertheless. The
propagation options are very confusing. It appears you need to set the
non-propagation rules first, then add the propagation rules separately. It
seems like this should be done in one pass instead of two. Maybe I'm missing
something but here's what this ended up like:

public bool SetAcl()
{
if ( this.Pathname == null || this.Pathname == "")
{
 ErrorMessage +=  "Path cannot be empty.";
 return false;
}

// *** Strip off trailing backslash which isn't supported
this.Pathname = this.Pathname.TrimEnd('\\');

   FileSystemRights Rights = (FileSystemRights) 0;

   if (this.UserRights == "R")
       Rights = FileSystemRights.ReadAndExecute;
   else if (this.UserRights == "C")
       Rights = FileSystemRights.ChangePermissions;
   else if (this.UserRights == "F")
       Rights = FileSystemRights.FullControl;

   // *** Add Access Rule to the actual directory itself
   FileSystemAccessRule AccessRule = new
FileSystemAccessRule(this.Username, Rights,
                               InheritanceFlags.None,
                               PropagationFlags.NoPropagateInherit,
                               AccessControlType.Allow);

   DirectoryInfo Info = new DirectoryInfo(this.Pathname);
   DirectorySecurity Security =
Info.GetAccessControl(AccessControlSections.Access);

   bool Result = false;
   Security.ModifyAccessRule(AccessControlModification.Set, AccessRule, out
Result);

   // *** Always allow objects to inherit on a directory
   InheritanceFlags iFlags = InheritanceFlags.ObjectInherit;
   if (this.InheritSubDirectories)
       iFlags = InheritanceFlags.ContainerInherit |
InheritanceFlags.ObjectInherit;

   // *** Add Access rule for the inheritance
   AccessRule = new FileSystemAccessRule(this.Username, Rights,
                               iFlags,
                               PropagationFlags.InheritOnly,
                               AccessControlType.Allow);
   Result = false;
   Security.ModifyAccessRule(AccessControlModification.Add, AccessRule, out
Result);

   //Security.AddAccessRule(AccessRule);

   Info.SetAccessControl(Security);

   return true;
}

Notice the two FileSystemAccessRules and subsequent assignments.

It works, but it's very non-intuitive if that's the only way to accomplish
this. This is another instance where the BCL follows a complex Windows API
to the letter when a few options could have made operation much simpler.

Thanks for your help!

+++ Rick ---

However, I still can't seem to get the permissions set properly. What I need
is basically:

This Folder only AND Subfolder and Files only

When I run my code I get the subfolder and files propagation right. However,
I Can't seem to get the permissions to show up properly for the actual
target folder. In this folder, if I bring up the Security dialog after
runnign the code I see Special Permissions checked rather than the
permissions I checked. In the special permissions then I correctly see the
permissions assigned to the sub folders and files, but not hte current
folder itself.