Changes in Exchange 2007 SP1 warrant a special "What's Different for Installation", IMHO. My configuration: Have existing Exchange 2003 site, front end/backend configuration. Have had Exchange 2007 installed in the past, but blew it all away when I saw there was no way to upgrade to Windows 2008 with Exhcange Sp1. Starting over with Exchange 2007 SP1 and my intended configuration is to have a Maiblbox server and a HT/CA server on a different box. When attempting to install Exchange 2007 SP1, I get the Public Folder inheritance issue. THe suggested fix has me puzzled: http://go.microsoft.com/fwlink/?linkid=34707. Topic Last Modified: 2007-06-19 Microsoft Exchange Server2007 setup cannot continue because the required permissions have not been able to propagate. Exchange setup requires that inheritance for permissions be enabled on the Public Folder tree objects. To resolve this issue, make sure that the "Allow permissions to propagate to follow to this object and child objects" setting is enabled, and then rerun Exchange Server 2007 setup. To re-enable the Public Folder tree inheritance Open Exchange Server2003 System Manager. Right-click the Public Folder store, and then click Properties. Click the Security tab, and then click to select the Allow inheritable permissions to propagate to this object check box. Step 3 makes no sensethere is nocheckbox for "Allow inheritable permissions" - what I have is the typical list of accounts and their rights to the Public Folder Store. This just doesn't make sense. "I understood each and every word, but not in to order in which they were presented" :-)

On the Security tab, click the Advanced button.

For which account? That is the point - it is NOT clear. Missing the Step 4 and possible 5.

BTW, my email service account already has tohose rights, so would it be the server account for the new Exchange 2007 servers, or some other account that needs to inherit rights?

Answer Found: ESM lies! I found an article that mentioned ADSIedit. Since there have been ciurcumstanses when what was presented in ESM and Active Directory Users and Computers was not accurate, I decided to give it a try. I drilled down from Configuration to Public Folders: Configuration Services Microsoft Exchange Sitename First Administrative Group Folder Hierarchies Then right-clicked Public Folders, clicked on the Secutiry tab, then Advanced - here the Allow inheritable was not checked despite the fact that in ESM it was checked! I checked it and now Exchange 2007 will install. I had a similar instance whan I had my previous Exchange 2007 installation up and I had my account there. My listed primary account was shown as a secondary address and my alias as the primary (a typical setup here in my large university). But I couldn't receive email from my alias. WHen checking my account in ADSIedit, the reverse was shown! Once I changed it in ADSIedit, it worked as expected. Moral of the story: Don't always believe what the GUI tells you. It may very well be false.