SSRS appears to be ignoring Permissions set using Report Manager
To give a user rights to work with SSRS they need to have permissions at the root folder (which is what it sounds like you have done), but you also have to go into the "site settings" link into  the "security" tab and add the user as (at minimum) a system user. 
It is easy to do one, but not the other. Both are required to allow full access to the system.