Why do you say you can't assign permissions  to individual  users? Select manage
permissions from the context menu of the folder. Then Select Edit permissions
from the Action menu. You should now see an New menu with Add Users. Select
that to add a user to the folder  and assign  a permission level  to the person.

What I kept doing iswhen you select the
folder inside a Document Library, select the option Settings -->
Document Library Settings I am changingthe permissionsat the Document
Library level  all the time, ehnce giving and taking away permissions
for indiviudals under the entire Docuemnt Library. I just figured
out that I have to use the drop down menu on the folder  and Manage
Permissions via that meu to manage the individual permissions  at the
folder level.

I think I was having a bad day with this one. So simple.