I'm not sure if he thought that was what you wanted or if it was just an oversight. It will only be within the next level of sub folders that they get permission to create/modify files. Having said that, I would say it is normal for BillyAB's suggestion to prevent users from creating/modifying files within your first level of folders.
So perhaps you can clarify your exact setup and which folders you want them to be able to create files in, which folders you wan't them to be able to rename/delete, which folders you want them to only be allowed to read, etc etc. I'm not sure exactly which levels of folders you want to have which behaviors.
