Ok, the quick specs:

Windows XP SP2 on the desktop
Zenworks 6.5 and Client 4.9 SP2

I have a workstation policy package that will apply to the system, and a
user policy package. In the past, this has been no problem. In working on
new polices for SP2 I have run into a wall. If I apply only the WS policy,
it works great. However, when I add the user it overwrites all WS policies
even though WS is turned off in MMC and all policies in that section are
not configured. The only difference I can get with loopback support is
that in merge mode the WS policies reapply and wipe out all of the user
policies. I do not remember ever having run into this before. I have
tried numerous variations in MMC of computer/user on and off, and also
loopback support. In C1, the user only applies user and computer only
computer. Yet, everytime they come down this happens. Any ideas?