GPO Issue - Need help.

I am trying to apply account policy (password + account lockout) for selected domain users.

1.       Created a group and included the users into this group (GroupA).
2.       In “Default Domain Policy” which is applied at the domain level (top most), I have edited the security setting of the policy as follows:
   1.       For “Authenticated Users”, “Read” is checked but “Apply Group Policy” is not checked.
   2.      For “GroupA”, “Read” and “Apply Group Policy” is checked.
3.       Sufficient time given for replication. Also used gpupdate /force. Also rebooted the domain controllers.

However, when I purposely type the wrong password, the account (which is a member of GroupA) does not get locked. FYI, I am using Windows 2003 R2 SP2 as my domain controllers. Do I have to maintain “Authenticated Users” for the policy for it to work? Also, I used the ADSIedit tool to check and found that the parameter “lockThreshold” at the domain level (top most) is set to “0”. Any idea why my policy is not applying? I have referred to these forums for information as well and followed accordingly but it does not work.