Problem Solved
After an afternoon of troubleshooting I believe I "may" have solved this issue.
I basically installed v8.0.4 anew and setup the configuration from scratch. Then I imported the volumes (Auto Import Volume), reset the permissions on each volume (Owner: guest, Group: guest, ACL: Windows, Mode: All checked but for Write on Group and Other; checked Set permission recursively) one by one, setup each Share manually again and now the permissions seem to work.
(Restoring a previous config backup did not solve this, I had to setup all the config from scratch.)
In fact, now in Windows 7 when check the permissions of a file or folder I don't get the error as before that stated the permissions order is incorrect.
I am not sure on what caused this and why all worked before v8.0.3, however this tedious procedure seems to have worked for me.
I hope this helps.