It seems that one of the design decisions made by the original e-smith team was NOT to support different permission in sub-directories.
Whenever you make changes to the permission dropdown in the server-manager, it will do a recursive change on the ibay.
So, even if you did manually set the permissions, ther will be over-ridden when you make a change to the permission drop-down in the server-manager.
Therefore, sme is not the best solution if you must have it. Or make sure the access control is based on ibays and not subirs...
Ed