There are different way to set the permission: see also this list as an exampe: http://stackoverflow.com/questions/2260634/wix-problem-to-give-permissions-to-a-folderi can it test but it looks other as my sample that works for an mce plugin
http://mce-plugins.svn.sourceforge.....0.0/Setup/Setup.wxs?revision=151&view=markup
70 - 94 defines the directories
103 -117 the references what should there make
I did only tested my implementation using utilsermissionEx and there the permission has been added to the other ones.
According to the thread i posted, the "Permission" element clears all other permissions before setting the new ones. But this is not what has been requested here, iirc.
Can you confirm the the one, you set with "Permission" is the only one? so the others for administrators, system and so on have been cleared before.