samba - Jun 2004 - samba 3.0.4 problem in getting userlist to set acls on windows xp

Hi all
I have a samba 3.0.4 pdc compiled with acl support built in, and the 
following options configured at compile time:

  ./configure --with-acl-support --with-smbclient --with-sm
bmount --with-quota --with-ads --with-tdbsam

I am just trying to provide acl support to my users, and I know that 
acls are working properly on the linux machine (setfacl and getfacl work 
superbly!).  Samba acl support is compiled in properly (as verified by 
smbd -b | grep -i acl).  Still, I am having a very strange problem.

If a file has acls set on it in linux itself, the owner or root can 
modify these permissions, and they are properly set in the linux machine.

However, if I try to add an existing user, I am unable to get  my 
Windows XP professional box ( my test computer) to recognize even users 
that it has listed in the acls.  Any attempt to try and add users starts 
with a dialog asking me to provide a username and password with 
modification privileges on the domain, and when I do so, the dialog 
hangs for around 5 minutes till it finally informs me that multiple 
connections to a shared resource are not allowed, and if I want to do 
so, I should disconnect all previous connections and reconnect again. 
This happens even when I am logged in as root.

I have not found any answer while going through mailing list archives. 
I know my problem must be some fundamental mistake I've made, but I 
haven't been able to figure it out so far.  I've got detailed logs for 
log levels 2, 5, and 10 for the various stages of the process, but I 
dont want to add them to this already long mail unless someone wants to 
have a look at them.

I'm completely confused, and would appreciate any help at all.

Thanks in advance
Prajjwal