<p>donL,</p>
<p>So I was curious enough about this one to research it out. I don’t have a 2003 server environment to test on, so it was up to “Google Fu” to check into this.</p>
<p>Turns out it is a “bug” in the GUI. The policy you applied did work correctly, it just doesn’t show up correctly in IE’s GUI on the client. Stupid, yes…but true.</p>
<p>Here’s an example accepted answer over on EE that mirrors this:</p>
<blockquote></blockquote>
<p>If you see “Some settings are managed by your system administrator”<br>
then it was applied successfully and is on Medium. You can verify<br>
this by clicking custom level and looking at each security option,<br>
they will coincide with what they should be for “Medium”.</p>
<p>You can disregard what it says on “Security level for this<br>
zone”…it’s not accurate.</p>
<p>For example, if you set it to low, it will still still say<br>
medium/high or high but if you click on custom level you will see<br>
“download unsigned activex controls” is enabled…which is a option<br>
that is enabled on low and disabled on high. - Jake77444 @ EE</p>
<p>And this blog also confirms it:</p>
<p><a href="http://blog.rhysgoodwin.com/windows-admin/ie-gpo-zone-templates-and-the-open-file-security-warning/">IE GPO Zone Templates and the “Open File – Security Warning”</a></p>
<blockquote></blockquote>
<p>In Conclusion</p>
<ul>
<li>
<p><strong>Security templates are not visually reflected in the security page of Internet Explorer even though they are applied.</strong></p>
</li>
<li>
<p>Security zone settings are applied to Internet Explorer by doing a gpupdate but a log off/on is required to apply these settings to the<br>
rest of the OS</p>
</li>
<li>
<p>The “Launching applications and unsafe files” setting determines whether the “Open File – Security Warning” dialog is displayed when<br>
launching applications from a given location</p>
</li>
<li>
<p>The “Launching applications and unsafe files” cannot be set with a an indvidual GPO setting. (You could create a custom adm file though)</p>
</li>
<li>
<p><strong>When setting zone security via GPO I recommend making the Internet Explorer security page invisible to users to avoid confusion<br>
as they can still quite happily adjust the security level slider, it<br>
just won’t have any effect!</strong></p>
</li>
</ul>
<p>Hope that helps! It was news to me!</p>