Thanks, that definitely helps a lot.
Yeah, the network sharing/homegroup stuff is supposed to be easy, but it can also be a pain in the you know what.
Instead of fighting with the permissions issue, here is what I would do:
Copy (don't move or cut) the files in the folder to another place on the drive, then copy them again to an external drive (flash/thumb drive is perfect). This is just to make sure you have backups. Then try to use a file shredding program to kill those contrary, original files you can't modify. File Shredder
is great for this. Run it as an Administrator (right-click > Run as administrator) when you use it. If it still kicks back that permissions issue, I have a plan B.
If it works, don't put another person's files inside your personal folder again. It makes things like this happen (permission issues). You're better off creating another user account, or just putting everything in the Public folder.
Let me know how it goes.